Are non-compete clauses enforceable in India?

No. Section 27 of the Indian Contract Act, 1872 voids any agreement that restrains someone from practising a lawful profession, trade, or business, and courts read it against the Article 19(1)(g) right to earn a livelihood. It doesn't matter how narrow the clause is or how senior the employee.

Can my employer stop me from joining a competitor after I resign?

No. In Varun Tyagi v. Daffodil Software (Delhi High Court, FAO 167/2025, decided 25 June 2025), the court rejected an employer's attempt to enforce a post-exit restraint and sided with the departed employee. A clause restricting where someone works after leaving is void under Section 27, however it is worded.

Is a non-compete ever enforceable while someone is still employed?

Yes. A clause that keeps an employee exclusive to the company only while they are still on the payroll counts as a normal condition of the job rather than a restraint of trade. Niranjan Shankar Golikari v. Century Spinning & Mfg. Co. Ltd. (Supreme Court, 1967) is the case courts still cite for this. The moment employment ends, that logic stops applying.

What can an employer use instead of a non-compete?

Confidentiality clauses, non-solicitation clauses, and garden leave. Confidentiality clauses hold up post-termination if the information is genuinely confidential and the restriction stays reasonable in time and scope. Non-solicitation clauses can stop a former employee from poaching clients or staff, but courts assess them case by case. Garden leave only works while the employee is still on the payroll and being paid.

Is there any non-compete that does hold up in India?

One narrow exception: a non-compete tied to the sale of a business can be enforceable if it is reasonable in scope, duration, and geography (Gujarat Bottling Co. v. Coca-Cola Co., 1995). That exception exists because goodwill changes hands along with the business itself. It doesn't extend to an employee's employment contract.

Non-Compete Clauses Are Void in India: What Actually Protects You Instead

Buildwright Team26 July 20265 min read

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Post-employment non-compete clauses are void in India under Section 27 of the Indian Contract Act, 1872, which voids any agreement that restrains someone from practising a lawful profession, trade, or business. Indian courts have upheld this consistently, most recently in a June 2025 Delhi High Court ruling, Varun Tyagi v. Daffodil Software, which struck down a clause trying to stop a departed employee from joining a new employer. The one restraint that generally survives is a clause that operates only while the employee is still on the payroll. Once employment ends, a clause stopping a former employee from working for a competitor doesn't hold up, no matter how it's worded.

This is the flagship fact in Indian employment drafting, and it's also the one founders get wrong most often, usually by copying a US employment template that assumes non-competes work here the way they don't.

The short answer: post-employment non-competes are void under s.27

Section 27 of the Indian Contract Act, 1872 voids every agreement that restrains a person from exercising a lawful profession, trade, or business. It doesn't matter how narrow the clause is, how short the restriction period, or how senior the employee. A negative covenant that only kicks in once someone leaves your company runs straight into this section.

Why: the constitutional right to earn a livelihood

Courts read s.27 against Article 19(1)(g) of the Constitution, the right to practise any profession or carry on any trade or business. A departed employee's ability to earn a living somewhere else outranks a private contract clause trying to stop them.

The during-employment exception courts actually uphold

There's a real exception here, and it's easy to overstate in either direction. A clause that keeps an employee exclusive to your company only while they're still employed isn't a restraint of trade at all. It's a normal condition of the job. Niranjan Shankar Golikari v. Century Spinning & Mfg. Co. Ltd., decided by the Supreme Court on 17 January 1967, is the case most often cited for this line: an employee can be held to exclusivity during service, but the moment employment ends, any clause restricting where they work next is void.

This article is general information, not legal advice. If you need advice for your specific situation, contact Buildwright directly.

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Non-Compete Clauses Are Void in India: What Actually Protects You Instead

The short answer: post-employment non-competes are void under s.27

Why: the constitutional right to earn a livelihood

The during-employment exception courts actually uphold

A 2025 example: an employee wins the right to join a competitor

The narrow business-sale exception, and why it doesn't rescue an employee non-compete

What US-template non-competes get wrong when copied into Indian contracts

What is enforceable instead

Next step: get an employment agreement that gets this right