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

Rohan, a chemist at Sundaram Pharma Ltd, Chennai, signs an employment contract stating that for 2 years after leaving he shall not join any competitor anywhere in India. He resigns and joins a rival. Sundaram sues to enforce the post-employment restraint. What is the likely position under Indian law?

The post-employment non-compete is likely void as a restraint of trade under the Indian Contract Act, 1872, despite Rohan's consent. Courts permit restraints only during employment. Sundaram can still enforce confidentiality obligations to stop Rohan from using or disclosing its trade secrets at the rival firm.

  1. AThe clause is enforceable because Rohan signed it voluntarily
  2. BThe clause is enforceable if Sundaram pays Rohan a nominal sum
  3. CThe clause is void as a restraint of trade under the Indian Contract Act, 1872, though confidentiality obligations can still be enforcedCorrect
  4. DThe clause is valid for 2 years because reasonable restraints are always permitted after employment ends

Explanation

Indian courts treat post-termination non-compete covenants as void restraints of trade under section 27 of the Contract Act, even if signed willingly. Restraints during the term of employment are generally valid. Sundaram can still restrain Rohan from using or disclosing its confidential information.

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