Upgrad LLM

compensation from ex employer

Teacher

Ld. Members


I was asked to resign from my company. The company, while i joined the company some years back, put a clause in the appointment letter that - I shall not join any company which manufactures and sells similar products as manufactured and sold by this company, for a period of 2 years from the date I resign.

But as per Sec 27 Indian Contract Act, this is void since this is an agreement in restraint of trade. In India, all agreements in restraint of trade, whether partial or general, qualified or unqualified, is Void.The Indian Court is not supposed to go into the question of reasonableness or otherwise. Any restraint on the employee after the tenure of service is void in India.

Because of this clause mentioned in my relieving letter, I have been denied employment in many companies. As per my experience I can work only in a similar company.

Now Can I file a suit against my company for Compensation?

Regards
 
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FIN

The employer may state incorporating such clause in appointment letter is legal. The company lawyer/law firm/legal cell/ or any lawyer may state such clause and restraint is legal.

The question arises: how would you establish that employment due to this clause has been declined to you and your candidature has been rejected?

Is it due to feedback given by your past employer during reference check, or any notice issued to you by your previous employer?

Do you any communication in writing from some consultant, or prospective employer stating your candidature cannot be considered/you can not be recruited or appointed due to such clause in appointment letter for 2 years?

In a court of law you shall require evidence. Can you build evidence?

Valuable opinion of learned experts and members having mastery on such matters is sought.

It shall be appropriate to get all record examined by a competent and experienced service lawyer for evaluating the merit in your case.


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Teacher

thanku for ur response sir

..i ask this on behalf of my friend actually..and now am answering all this on es behalf only as far as i know about the situation..i shall update u more once i get more queries or response about the same..sorry if somethings dont suffice..

how would you establish that employment due to this clause has been declined to you and your candidature has been rejected?

the clause aplty says that company making similar products are like competitors and one cannot do work and atleast wait for max 2 years before joining any other company.hence the person is not rendered for any other job..as in today there are very few company in the world in that particular field.

Is it due to feedback given by your past employer during reference check, or any notice issued to you by your previous employer?

nope, its because of 498a and dv  cases by the wife, where the girls father called the manager to throw him out from work..

Do you any communication in writing from some consultant, or prospective employer stating your candidature cannot be considered/you can not be recruited or appointed due to such clause in appointment letter for 2 years?

yes this is mentioned in appointment letter as well as the other letter that we get on  leaving job.

In a court of law you shall require evidence. Can you build evidence?

well as a matter of fact its totally putting restraint on a person to the right of work..or employment..as far as id put..

 
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FIN

Regret that your response does not substantiate that the prospective employer rejected candidature due to clause in appointment letter. All that happened is verbal. The past employer has not written to the ex. employee or prospective employer or next employer.

Based on telephone call by FIL company has asked to resign or obtained resignation under coercion or has issued any communication by email, letter etc?

It is understood that you may not be in a position to disclose everything.

It shall be appropriate to consult a lawyer at your location and give all inputs in person and your lawyer shall be able to evaluate the merit. An intelligent lawyer may be in a position to help you.

 
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Teacher

thanku sir..

i shall revert back with more technical language next time.

..moreover am sorry for not being able to comprehend much of the legal lang here and the questions put..

maybe thts why am not able to enlighten u rightly with the case concerned..

 
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FIN

You have posted:

"

Is it due to feedback given by your past employer during reference check, or any notice issued to you by your previous employer?

nope, its because of 498a and dv  cases by the wife, where the girls father called the manager to throw him out from work.."

From your post apparently the employee had to leave the job either while in employment, or before joining, after induction, due to phone call by FIL tot he manager of current employer/prospective employer. Was any offer letter, letter of selection, appointment letter, and induction report issued to employee?

The past employer shall be deemed to have caused adverse effect on source of livelihood if due to any communication (which can be established as evidence) from past employer the employee was shunted out of the job.

If the current employer has any communication (which can be established as evidence) by email, letter, memo stating employee must resign or employment stands terminated due to ...........clause in appointment letter.

Has the employee submitted any communication stating that he/she has been advised to tender resignation on dated.........by.........Mr/Ms due to the ..............clause in his appointment letter issued by previous employer, and hence the resignation letter is being submitted?

There has to be some proof.

Valuable advice of learned experts/members is sought.

 

 
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Teacher

Sir

here's what the person intends to ask in es own lang..

keep the question of compensation aside...now

Can a company put such a clause in the appointment letter/relieving letter of an employee

. Because,

1) As per Indian Contract Act, section 27 - such a contract would be a void contract

2) In case I join another similar company within the stipulated period, can my previous employer sue me?

Regards,

 
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FIN

You may find the attachment useful. Kindly go thru it.

If you are facing a specific real life situation your service lawyer shall be able to defend you and shall be able to produce all the relevant judgments, etc.

In practice companies do include clauses cited by you in appointment letter and relieving letter, and lawyer do defend their clients facing such situations.

Employee at the time of joining the company can refuse to sign/ can submit dissent on appointment letter, containing such clauses.



Attached File : 567046348 indian contract act 1872 sec 27 agreement in restraint of trade void.doc downloaded 62 times

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Teacher

thanku sir for the valuable advice..n yeah wishing u a very happy new year 

 
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Consultant & Legal Analyst

Dear Aishwarya,

 

First of all you should not misinterpret sec. 27 of the Indian Contract Act and confuse between "employment" as an employee and "profession, trade or business". Section 27 deals with only profession, trade or busines, not service.

 

Secondly, may there be the effect of revengeful act on account of some 498a case, but conditions of employment, as agreed by you on joining the organisation are quite distinct matter, which happened supposedly much earlier than the 498a case. I can understand the rigour of 498a case is quite unbearable for any person, as both the parties behave like deadly enemies in such cases.

 

So far as the terms of condition, there is no illegality in such a clause of restriction. However, I would like to advise you that you may try for some other job, which may not be similar in nature of your previous job. But, if the other party is bent upon harming your interests, they may approach your new employer also unless you keep your employment matter as a top secret.


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