The Delhi High Court ruled that a non-compete clause restricting an employee from taking up new employment after resignation is void under Section 27 of the Indian Contract Act, 1872. Justice Tejas Karia held that any clause preventing employment post-termination is a restraint on trade and unenforceable. The Court clarified that employers can only restrict employees from sharing confidential information or soliciting clients, not from working elsewhere. In this case, a software developer joined Digital India Corporation (DIC) after resigning from his former company. The former employer objected, citing a three-year non-compete clause. However, the Court noted that DIC owned the intellectual property of the project. The apprehension of data leakage was baseless. Referring to American Express Bank Ltd. v. Priya Malik (2006), the Court emphasized that employees have the right to seek better job opportunities and cannot be forced to stay with a previous employer.
The Trial Court’s interim order restraining employment was overturned. The High Court concluded that such restrictive clauses violate Section 27. They upheld the employee’s right to work with DIC, allowing the appeal.
