A non-compete clause that stops you from working for a competitor after you leave your job is generally void and unenforceable in India. This surprises many employees who assume a signed contract is automatically binding. The reason is Section 27 of the Indian Contract Act, 1872, a 150-year-old provision that Indian courts have consistently applied to strike down post-employment restraints, no matter how the clause is worded.
What does Section 27 actually say?
Section 27 of the Indian Contract Act states that every agreement by which anyone is restrained from exercising a lawful profession, trade, or business of any kind is void to that extent. Unlike some other countries, Indian law does not carve out an exception for "reasonable" restraints; the provision is applied broadly against anything that restrains a person's right to work.
What have courts actually ruled?
The Supreme Court refused to enforce a post-employment restriction in Percept D'Mark (India) (P) Ltd. v. Zaheer Khan on the basis that it was barred by Section 27. Earlier, in Krishan Murgai, the Court clarified that this holds true irrespective of the restriction's duration, six months or six years, or geographic scope, one city or the whole country. More recently, the Delhi High Court in Varun Tyagi v. Daffodil Software (P) Ltd. (2025) reinforced this, holding that any employment contract term restricting an employee's right to get employed after termination is void under Section 27.
Does the length or narrowness of the restriction matter?
No. Employers sometimes assume that a narrowly drafted clause, say, restricted to a specific city for three months, will be treated more leniently by courts. Indian case law does not support that assumption for post-employment restraints; the courts' position has been that such a restriction is void regardless of how limited it is in time or geography.
What can employers use instead of a non-compete?
Confidentiality and non-disclosure obligations protecting genuinely confidential information and trade secrets are treated differently from a blanket ban on working for a competitor, since they do not restrain the employee's ability to work, only their use of specific protected information. Non-solicitation clauses, preventing a former employee from actively poaching the company's clients or staff, are also generally viewed more favourably than a broad non-compete, though their enforceability still depends on how they are drafted and applied.
What about non-competes during employment?
Restrictive covenants that operate only while someone remains employed, for instance a bar on moonlighting for a direct competitor during active employment, are generally treated as valid, since Section 27 is concerned with restraints that follow a person after the relationship ends, not conditions attached to the job itself. Non-compete disputes often surface right at the point of termination; see our guide to remedies for illegal termination and unpaid notice pay for the broader landscape of termination-related employee rights.
Disclaimer: This article is for general information only and is not legal advice. Outcomes depend on the specific clause wording and facts; consult a qualified advocate before relying on or drafting any restrictive covenant.
Frequently asked questions
Are non-compete clauses legal in India?
During employment, yes, restrictions on working for a competitor while still employed are generally enforceable. After employment ends, generally no, post-employment non-compete clauses are void under Section 27 of the Indian Contract Act, 1872.
What does Section 27 of the Contract Act actually say?
It states that every agreement restraining anyone from exercising a lawful profession, trade, or business of any kind is void to that extent. Courts have applied this to strike down post-employment non-compete clauses regardless of how narrow or short the restriction is.
Does it matter if the restriction is only for 6 months or one city?
No. The Supreme Court has held that a post-employment restraint is void irrespective of whether it applies for six months or six years, or covers a single city or the entire country. Reasonableness of scope does not save a clause that Section 27 already voids.
Can an employer still protect confidential information after an employee leaves?
Yes, through separate mechanisms that are not restraints on trade: confidentiality and non-disclosure obligations, protection of trade secrets, and non-solicitation of the company's clients or employees are generally treated differently from a blanket ban on working for a competitor, and can be more likely to hold up.
What about non-compete clauses during employment, not after?
Restrictive covenants that operate only while the employment relationship continues, for example a requirement not to moonlight for a competitor while still employed, are generally treated as valid, since the employee's ability to earn a livelihood is not permanently restrained.