Eric Cartmen (Executive) 17 November 2013

Non compete bond

I was working in a advertising firm in India. Now I am starting my own start-up with my few friends also working in the same firm we have resigned from the firm last month but as per the non-compete bond which state that

' You will not without the prior written consent of the company ( such consent not to be unreasonably withheld) directly or indirectly and whether alone or in conjuction with or on behalf of any other person firm, company or organisation and whether as a principal, shareholder, director, employee, agent, consultant, partner or otherwise:

a) for a period of 12 month from the termination date be engaged, concerned or interested in, or provide technical, commercial or professional advise to any other business which supplies relevant services in competition with the company or any relevant group company provied that the restristion does prevent the manager from holding shares or other securities in any comany which is not in competion with the company.

b) for a period of 12 month from the termination date be engaged, concerned or interested in any business which at any time during the relevant period is or was customer of the company if such engagement, concern or interest cause or would cause the relevant customer to cease or materially to reduce its orders or contract with the company.

c) for a period of 12 month from the termination date so as to compete with the company, solicit or approach or cause to be canvassed, solicited or approached any relevant customer or prospective customer for sale or supply of relevant services or endavour to do so

d) for a period of 12 month ffom the termination date so as to compete with the company or any relevant deal or contart with any relevant customer in relation to sale or supply or any relevant services or endavour to do so.

e) for a period of 12 month from termination date solicit, induce or entice away from the comany in connection with any business in a or proposing to be in competion with comany , employ, engage or appoint or in any be employed , engeded or appointed a critical person whether or not such persoon would commit any breach of his contact of employment by leaving the service of the company.'

these are some of the clause, Let me know if we can start our own start- up avoiding any legal obligation arising due to this non compete bond.?

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2 Replies

Kumar Doab (FIN) 17 November 2013

You have posted that:

-----“ ( such consent not to be unreasonably withheld)”

The relationship is Employer-Employee.

----“as per the non-compete bond “

It is believed that it is clearly mentioned in writing on the document as Title that it is a “non-compete bond “.

Indian courts have consistently been denying to enforce: post termination of the employment, non compete agreements, clauses etc as it is against fundamental right to earn livelihood and hits Indian Contract Act.

-----“ ( such consent not to be unreasonably withheld)”

It can be construed that company is aware of reasonableness of the matter.

The clause (e) hints to Non-Solicitation that may apply.

Since there is a bilateral agreement signed by you with employer the employer can claim legal injury and approach court of law.

The decision on reasonable period, costs, if any etc is pleasure of the court of law and shall be decided by court of law.

It shall be appropriate to show all docs in person to a competent and experienced labor consultant/service lawyer/ law firm specializing in such matters and proceed under expert advice.

The lawyer that has seen all docs and has analyzed the inputs can advice you the best.

In the meantime you may go thru the attachments.

Attached File : 981965240 417759075 validity of employment bonds.pdf, 981965240 background paper.pdf downloaded: 206 times

Advocate Ashok Kumar (Counsel) 28 November 2013

Hello,

Non compete clauses in any agreements come under the scope of the Indian Contract Act which governs all the laws of contracts in India. The Act also determines the circumstances in which promises made by the parties to a contract shall be legally binding on them. Every contract must be an agreement enforceable by law. Some contracts may have some clauses that are not valid or are illegal, but that would not render the entire contract invalid if its can be cleanly separated from the main body of the contract. Your question is directly related to Section 27 of the Indian Contract Act, which states that any agreement, which restrains anyone from carrying on a lawful profession, trade or business, is void to that extent. The Judiciary has come out with a lot of decisions in this regard such as Superintendence Co. of India Pvt. Ltd. v. Krishan Murgai, and M/s. Sociedade de Fomento Indl. Ltd. v. Ravindranath Subraya Kamath, where they held that the wording of the agreement would determine whether it will be void under the act, and that an employer cannot prevent an employee from gainfully using any knowledge acquired during the course of his employment. Your old firm might try to file a case against you demanding damages etc., so you should get in touch with a good lawyer who will be able to fight the case on your behalf and save your new startup from legal troubles.

Regards,

Advocate Ashok Kumar; www.lawkonect.com