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1 - 10 of 10 (0.24 seconds)The Finance Act, 1996
Section 27 in The Arbitration And Conciliation Act, 1996 [Entire Act]
Superintendence Company Of India (P) ... vs Krishan Murgai on 9 May, 1980
19. The Apex Court in Superintendence Company of India Pvt. Ltd v.
Krishan Murgai AIR 1980 SC 1717 relying on several judgements by House
of Lords observed that principally, covenants in restraint of trade, partial as
well as general are prima facie void and cannot be enforced unless the test
of "reasonableness" is satisfied. Further, it drew a distinction between
contracts of service and contracts for the sale of a business holding that
Agreements of Service containing a negative covenant preventing the
employee from engaging in services elsewhere during the term of the
agreement are not void under Section 27 of the Contract Act since doctrine
of restraint of Trade is inapplicable during the continuance of a contract of
employment and shall apply once the contract comes to an end.
Niranjan Shankar Golikari vs The Century Spinning And Mfg. Co. Ltd on 17 January, 1967
20. The Apex Court, in the case of Niranjan Shankar Golikari v. The
Century Spinning And Mfg. Co. 1967 SCR (2) 378 highlighted the
distinction in the applicability of restrictive covenants such as non-compete
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and non-solicitation Agreements during employment and post the course of
employment. It was observed that negative covenants would be legally
enforceable when they are operative during employment. Such covenants
would be valid if found, reasonable and not against the public policy. The
court, in the above judgement, took a liberal approach in observing that not
all post termination/ non-compete clauses are in restraint of trade and held
that, „a negative covenant that the employee would not engage himself in a
trade or business or would not get himself employed by any master for
whom he would perform similar or substantially similar duties is not
therefore a restraint of trade, unless the contract as aforesaid is
unconscionable or excessively harsh or unreasonable or one sided.‟
Wipro Limited vs Beckman Coulter International S.A. on 11 July, 2006
21. The Delhi High Court has discussed the legal validity of a non-
solicitation agreement in Wipro Ltd v. Beckman International 2006 (131)
DLT 681 and observed that a non-solicitation clause would not be void per
se and if the clause is reasonable, it would not be violative of Section 27 of
the Indian Contract Act, 1872 either. The clause in question bars contracting
parties from inducing their employees to give up their current employment
and join such other party. Thus, the Court has crystalized the following
principles; firstly, negative as well as positive covenants that are applied
during the course of employment cannot be inferred as restrictive of trade, if
reasonable; Secondly, such agreements are not applicable post-termination
of the employee contract; Thirdly, the Courts shall take a more stringent
approach when dealing with employee-employer contracts than in other
contracts, such as partnerships because it is believed that in employer-
employee relations, one is in a dominant position. Lastly, the bar under
section 27 of the Act would not be attracted in cases where the non-
Mr. Diljeet Titus, Advocate vs Mr. Alfred A. Adebare And Ors. on 8 May, 2006
solicitation clause operates between two individuals, businesses, or
partnerships as the restriction was put solely on the contracting parties.
Similarly, in Mr. Diljeet Titus, Advocate v. Mr. Alfred A. Adebare and Ors.
2006 (32) PTC 609 (Del), the Delhi High Court clarified that confidential
information of the employer can be protected even in the post-employment
period.
Le Passage To India Tours & Travels Pvt ... vs Deepak Bhatnagar on 20 January, 2013
22. Subsequently, the Delhi High Court in LE Passage to India Tours &
Travels Pvt. Ltd v. Deepak Bhatnagar (2014) 209 DLT 554 has observed that
while there is a complete ban on any agreement that restrains trade, there is
an exception when the limits applied to such Agreements are declared
reasonable by the Court.
The Indian Stamp Act, 1899
Affle Holdings Pte Limited vs Saurabh Singh And Ors. on 22 January, 2015
27. This has been upheld by the Delhi High Court in Affle Holdings Pte
Limited v. Saurabh Singh 2015 SCC OnLine Del 6765 where the court
examined the validity of a negative covenant which restricted the respondent
from engaging in a competing business for a period of 36 months. The court
observed that since the respondent acquired a business which was competing
with the business of the appellant with the clear intention of acquiring its
goodwill, the covenant would fall within the exception envisaged in Section
27 and would not be in restraint of trade.
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