Neosky India Limited & Anr. v. Mr. Nagendran Kandasamy & Ors.
Court – Delhi High Court
Citation – O.M.P.(I) (COMM.) 183/2024
Date – 11.08.2025
The Hon’ble Delhi High Court has held that Restrictive Covenants after termination of Employment Contract are void as per the Section 27 of the Indian Contract Act 1872. The Court vacated the injunction granted under Section 9 of the Arbitration & Conciliation Act 1996.
The Court held,
“80. Thus, the position that emerges is that the doctrine of restraint of trade, as embodied under Section 27 of the Indian Contract Act, 1872, applies when the contract comes to an end. A clear distinction exists between a non-compete clause that operates during the subsistence of employment or an Agreement, and one that is sought to be enforced post-termination. While a restrictive covenant during the term of employment may be legally permissible, any such restraint operating after the termination of employment or expiry of the agreement is subject to the rigours of Section 27. Once the NCA has come to an end by efflux of time, or ceases to apply due to the termination of employment, it cannot be enforced post expiry of the Contract.
81. Accordingly, in the present case, the NCA ceased to apply to the respondent Nos. 1-3 from the date of their resignations. Furthermore, the non-compete clause was contractually limited to a fixed duration of three years from the effective date, which expired by efflux of time on 25.05.2025. In view of this, the restraint cannot now be sought to be enforced post-expiry, as it would be in the nature of a posttermination restraint.
84. Allowing them to be extended based on prima facie observations would violate Section 27 of the Indian Contract Act, 1872, and would amount to imposing an unreasonable restriction on the respondents‟ right to practice their trade or profession, which is protected under Article 19(1)(g) of the Constitution of India.”
— Team AMLEGALS
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