ENFORCEABILITY OF NON COMPETE AND NOTICE PERIOD CLAUSES IN INDIA

08/08/2023 Corporate & Commercial, MSMEs, STARTUPS By Maithani
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Watch our video on the enforceability of non-compete and notice period clauses in India. Recently, Ashneer Grover, the former co-founder and managing director of the Indian fintech company BharatPe, shared his thoughts on Non-Compete and notice period clauses in an interview. According to him, these clauses are invalid and unenforceable in the court.

 

However, the truth is that the enforceability of these clauses depends on several factors and is subject to certain limitations in India. So, we will delve deeper into this topic and discuss the extent to which non-compete and notice period clauses are enforceable or unenforceable in India. Let’s get started!

 

Q: Are non-compete clauses enforceable in India?

A: Yes, non-compete clauses are generally enforceable in India, subject to certain conditions and limitations. The duration, geographic scope, and nature of the activity being restricted should be reasonable, and the clause should not unduly restrict an employee’s right to earn a livelihood.

 

Q: Can a non-compete clause be overly broad or unduly restrictive?

A: No, a non-compete clause should not be overly broad or unduly restrictive of an employee’s right to work and earn a livelihood. The duration should be reasonable and should not exceed the duration of the employment or one year, whichever is shorter.

 

Q: Are notice period clauses enforceable in India?

A: Yes, notice period clauses are generally enforceable in India if they are reasonable in terms of the notice period required and the circumstances of the employee’s departure. The notice period should not be excessively long or burdensome for the employee.

 

Q: Can non-compete and notice period clauses violate Indian law or public policy?

A: Yes, non-compete and notice period clauses may be unenforceable if they are found to be in violation of Indian law or public policy. For example, if a non-compete clause prohibits an employee from working in the same industry as the employer, it may be held to be in violation of Section 27 of the Indian Contract Act, 1872.

 

Q: Are there any protections for employees under Indian labor laws?

A: Yes, Indian labor laws provide certain protections to employees, such as the right to terminate their employment with reasonable notice and the right to work in a profession of their choice. Therefore, any non-compete or notice period clause that seeks to limit these rights may be held to be unenforceable.

 

Q: What factors determine the enforceability of non-compete and notice period clauses in India?

A: The enforceability of non-compete and notice period clauses in India will depend on various factors, including the specific terms of the agreement and the circumstances of the case. The duration, geographic scope, and nature of the activity being restricted should be reasonable, and the clause should not unduly restrict an employee’s right to earn a livelihood.

 

In conclusion, while non-compete and notice period clauses are generally enforceable in India, their enforceability is subject to certain conditions and limitations. The Indian courts have held that these clauses should not unduly restrict an employee’s right to earn a livelihood and must be reasonable in terms of duration, geographic scope, and the nature of the activity being restricted. It is crucial for employers and employees to understand these limitations and conditions while drafting and signing employment agreements.

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