An agreement restricting trade has been identified as an agreement in which a party agrees with any other party to exercise, trade, business or profession in the future with other persons who are not parties to the contract in the manner it chooses. Non-compete obligations have therefore been repeatedly regarded by Indian courts as restrictive covenants that infringe a party`s freedom of trade. A literal interpretation of Article 27 invalidates all non-compete obligations, regardless of their adequacy or the consideration paid for such alliances. However, in an employment situation, these clauses are generally considered valid during the period of employment, but invalid after dismissal. It must be the subject of a broad debate on public order. It is illusory, variable and uncertain. It is difficult to define precisely the notion of public policy. The concept of public policy can be broadened and modified. It is up to the judiciary to explain the concept of “public policy”. There are several guidelines established by the judiciary to determine what is and is not public order. Some of them can be expressed as follows: any agreement that tends to violate the public interest or the public good is contrary to public policy.

In addition, it may include anything that is subject to the injustice of functioning, the restriction of liberty, trade and natural or legal rights, anything that tends to hinder injustice or violation of laws, and that which violates morality can be qualified as contrary to public order. Agreements that are actually contrary to public policy and what is not are entirely at the discretion of the courts. It is therefore apparent from the foregoing that the Indian courts have adopted a rather restrictive approach. A non-compete/non-solicitation obligation or clause to that effect is valid in India for very narrow reasons, namely. meet the three-step adequacy test in order to promote trade and industry, rather than create an obstacle to it, and not work in such a way as to restrict the fundamental right of workers to trade, industry and livelihoods. However, they may be applied to prevent proprietary information or secrets or confidential information of an employer from being breached, transmitted or disclosed, in particular to competitors. It can also be applied more effectively in terms of relationships between business partners/distributors/etc. In India, the traditional approach of any trade restriction agreement is that it is prima facie void and can only be applied if it can be reasonably justified in the circumstances, both by reference to the public interest and the interest of the parties. However, there are important differences in the courts` approach to deciding whether such adequacy is made, depending on whether the agreement was concluded in the context of a commercial transaction or in the context of an employment contract. Whether it is a non-compete obligation in a commercial transaction or an employment contract, there are no defined rules or fixed parameters for deciding to what extent such clauses can be accepted, and each case therefore revolves around its own facts. The Supreme Court in Niranjan Shankar Golikari v.

Century Spinning and Mfg. Co. Ltd. has thus clarified a liberal interpretation of Article 27 of the Contracts Act according to which all non-competition obligations that take effect after the termination of the employment contract are not prima facie prohibited and required in order to assess the emergence of non-competition and non-competition clauses in the contractual field, it is necessary to dive deep into history. In 1414, Judge Hull, speaking on behalf of the judiciary in the Dyer case,[1] struck down with a hard hand an agreement restricting trade which stated: “On my action you could claim demurrage, with the objection that the obligation is void or that the contract violates customary law; and under oath, if the applicant were present, he would be taken into custody and pay a fine to the king. [2] The scathing remarks recall the rigid attitude of the Brotherhood of Justice towards trade restriction agreements. It was only after Mitchel v. Reynolds of 1711[3] that the principles of these clauses were etched into common law systems and were later extended to other jurisdictions. In the present case, the contrary view that trade restriction agreements were still illegal by distinguishing the fine line between reasonable and unreasonable restrictions was rejected. A non-solicitation clause usually refers to an agreement between an employer and an employee that prohibits an employee from using the company`s customers, customers, contact lists, etc. after that employee has left the company.

These, such as non-compete obligations/agreements, may also exist between independent parties as mentioned above. The Indian courts have recently adopted a somewhat more flexible view, although this situation is far from ideal from the employer`s point of view. Although it is now widely clarified that such restrictive agreements in agreements are binding on the signatory within the framework of the partnership/employment, the applicability of these clauses is after termination, where many judicial deliberations have taken place that have led to different points of view. With the increase in cross-border trade and the improvement of the competitive climate in India, prohibitions on privacy, non-competition and solicitation are becoming increasingly popular, especially in the information technology and technology sectors. A large number of outsourcing and IT companies include prohibitions on confidentiality, non-competition, and solicitation in agreements with their employees, the terms of which range from a few months to several years after the termination of employment. .