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CS Professional · Intellectual Property Rights - Law and Practice · Protection of Trade Secrets

Kiran, a software engineer at Nexa Tech, signed an employment agreement with a clause barring him from working for any competitor for three years after leaving, anywhere in India. After resigning, he joins a rival. Nexa seeks to enforce the clause. Under Indian contract law, what is the likely outcome of enforcing the post-employment restraint?

The post-employment non-compete is likely unenforceable because Section 27 of the Indian Contract Act voids agreements in restraint of trade. However, Nexa can still obtain relief against Kiran's use or disclosure of its confidential information under confidentiality obligations and breach of confidence.

  1. AEnforceable, since the three-year period is reasonable by default
  2. BEnforceable only if Nexa pays Kiran damages in advance
  3. CUnenforceable as a restraint of trade under Section 27 of the Indian Contract Act, 1872, though Nexa can still restrain misuse of its confidential informationCorrect
  4. DEnforceable but only within the state where Kiran worked

Explanation

Section 27 of the Contract Act voids agreements in restraint of trade, and Indian courts generally refuse to enforce post-termination non-competes. Confidentiality obligations are different, so Nexa may still obtain an injunction against misuse of its trade secrets. The option allowing enforcement by reasonableness applies an English-law test not adopted for post-employment restraints.

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