Non-Compete Agreement — Drafting for Indian Law

Partly. Section 27 of the Indian Contract Act, 1872 voids any agreement that restrains a person from a lawful profession or business, so a restriction that starts after employment ends is generally void. A restriction during employment is enforceable. A restraint tied to the sale of a business’s goodwill is also allowed, if reasonable. We draft for these enforceable cases and tell you plainly where the law will not help.

Usually not through a post-exit non-compete, because Section 27 makes it void, and the Supreme Court said so in Percept D’Mark v Zaheer Khan (2006). What does work: confidentiality, non-solicitation of named clients, notice periods, and protection of trade secrets through contract. We build the agreement around these tools so your business has real protection and not just a clause on paper.

Exclusivity during the term is valid. An employee, consultant or partner can be told not to work for a competitor while the relationship lasts, and the courts enforce this, as in Niranjan Shankar Golikari v Century Spinning (1967). Such terms are written to match the role. We also help set a notice period, so there is no gap in cover when someone leaves.

Yes, within limits. Exception 1 to Section 27 allows a seller of goodwill to agree to stay out of the same business within specified local limits, for a reasonable period, as long as the restriction is reasonable for protecting the buyer. The restriction must be linked to a real sale of goodwill or shares. We draft this into the share or business purchase agreement.

Yes, but courts look at its reasonableness. A founder or investor who remains a shareholder can accept restrictions while holding shares and sometimes for a short time after exit, particularly where goodwill or a sale is involved. Where the restraint is wide and unconnected to goodwill, it may fail. We keep the scope narrow, which also makes it easier to defend.

Four tools work in practice: a confidentiality clause, a non-solicitation clause covering named clients and staff, a reasonable notice period or garden leave, and an assignment of intellectual property. Courts look favourably on narrowly drawn non-solicitation clauses. We usually combine these in one agreement, so the protection does not rest on one clause.

The four Labour Codes came into force on 21 November 2025 and made appointment letters mandatory. They do not repeal Section 27. A non-compete in an appointment letter is still subject to that section. What the codes change is documentation, so we align the agreement with the appointment letter and your standing policies to avoid conflict between the two.

Yes. Stamp duty depends on the state and the nature of the document, and an instrument not duly stamped is not admitted in evidence (Indian Stamp Act, 1899, Section 35), unless duty and a penalty are paid. In Haryana the e-stamp paper is generated through the e-GRAS portal. We confirm the amount for your document and arrange stamping before signing.

Yes. We draft the agreement for your review, align it with your employment, shareholder or purchase documents, arrange stamping and keep signed copies organised. Where you need a legal opinion on enforceability, or want to take a breach to court, a practising advocate reviews and signs. We coordinate that so you deal with one team.