Under the Contract Law, a non-compete clause is well established as the clause being drawn up in any agreement between two parties where the employer is one party and the employee is the other party. It prohibits workers and/or former employees, by virtue of the non-compete clause, from undertaking a similar career or trade with the employer's competitor after the termination of employment. The restriction could be placed on working in a competitive business, working in the relevant geographical market, soliciting clients from the previous employer, and in the majority of the cases a complete ban in disclosure of trade secrets and confidential information.

In India, such a clause is regulated by the codified provisions of section 27 of the Indian Contract Act, 1872 ('Contract Act'), to the degree that any agreement by which someone is prohibited from performing a legal profession, trade or company of any sort is void. The Indian courts have more or less adhered to the law's letter and have given a coherent view that such provisions are viewed more as a rule of equity than a contract.

Indian courts found the pre-termination period of employment to be different from the post-termination period of employment when dealing with conflicts relating to such a non-compete provision under the employment agreement. Although the courts were respectful of the implementation of the non-compete clause, they walked an extra mile to ensure that the clause would not have an impact after the termination of employment and found that the clause must fall within the meaning of section 27 of the Contract Act. It is also necessary to ensure that the cap imposed by the employer is fair and not harsh on workers in order to qualify for compliance by law. While the non-disclosure clause can be considered prima facie negative in nature, it is true and legally enforceable. Indian businesses currently differentiate between 'key' staff and 'non-key' staff. Along with either a 'garden leave' or a fixed-term clause, key employee contracts provide for a non-compete restraint during employment. An employee must send a long-term notice to the employer in advance of his resignation from employment under a 'Garden Leave' clause and the employer pays him full remuneration in return during this time when he is restrained from competing. In compliance with this provision, the notice needed for the employee to terminate his employment may be extended to one year with the company having the right to compel him not to attend work after serving the aforementioned notice for any period. Therefore, after three months, the organization might potentially put him on garden leave. Although this principle is a common instrument used by employers in other parts of the world, particularly the United Kingdom, as a replacement for the non-compete clause, it still lacks legal support from the Indian courts. In India, the conventional approach to any trade restriction agreement is that it is prima facie null and can be applied only if, in the circumstances, it can be justified as being fair by relation to both the public interest and the interests of the parties. However, in determining the issue of such reasonableness, there are some significant variations in the approach of the courts, depending on whether the covenant was concluded in the form of a contractual transaction or as part of an employment contract. However, when dealing with a non-compete clause in a business agreement or in any contract of employment, there are no specified rules or predetermined requirements to determine the degree to which such provisions can be approved and, as a consequence, each case relies on its own facts.

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.