Now-a-days,
it is becoming a popular practice by established companies to insert a negative
covenant clause in their service agreement. Such clauses generally mean to
restrain the outgoing employees of a company for a certain period from joining
other company or practice similar trade themselves or jointly with others.
The
Indian law does not recognize such restrictive agreements. As per Section 27 of
the Indian Contract Act, 1872, such contracts to that extent are void and
against public policy. No employee can be prevented from pursuing similar work
if he/she quits the present one, merely on the pretext that it will be
detrimental to the previous employer.
Gujarat
High Court in this context, in the case of Sandhya Organic Chemicals v. United
Phosphorous held that, an employee cannot be prevented from utilizing the
knowledge and experience that he has gained while being in employment. In
Ambiance Indai pvt Ltd vs Naveen Jain, an agreement between the parties
prohibiting an employee for two years from taking employment with present, past
or prospective customer of plaintiff was held to be void and contrary to
section 27 of the Indian Contract Act.
It was held that such a stipulation would prima facie be against public
policy of India and arm-twisting tactic adopted by employer against young man
looking for a job.
The
Supreme Court in Superintendence Co. of India v. KrishunMurgai. AIR 1980 SC
1717 has ruled that under Section 27 of the Contract Act. a service covenant
extended beyond the termination of the service is void.
Though
such post termination restraint agreements are void, confidentiality and
non-disclosure agreements are valid and effective when it is exercised during
the time when the employee is in service.
Madhu.T.K
