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Mayuresh M (Engineer)     05 February 2012

Restriction against joining competitor's firm

Hello Respectives,

In my offer later (which acknowledged by signature also), the company has put the point that -

"You are not allowed to join the competitors firm (i.e. having same product) for at least two years after leving this company."

But I have been receiving very good opportunities from competitors

Someone has told me that there is a section in labour laws where it is mentioned that

"No company can restrict his employee fron joining other in any case"


I woulf like to know about it whether the section really exist and if I can join the competitor's firm in this scenario.


Thank you



 11 Replies

Adv.R.P.Chugh (Advocate/Legal Consultant (rpchughadvocatesupremecourt@hotmail.com))     05 February 2012

Dear Mayuresh, 

This term in the contract is not binding on you as the same has no effect in the eyes of law i.e it is void. You can work in the competitor's firm after leaving the company and you cannot be restrained from doing so as that would amount to an agreement in restrain of lawful profession. But be sure to leave the company as per the rules and intimate them about the illegality of this particular clause by a competent lawyer. 

 

Feel free to ask for any clarifications.

 

Bharat

Kumar Doab (FIN)     06 February 2012

Kindly obtain the copy of certified standing orders of your company. This may be available at HR page of intranet, or with concerned HR personnel. Standing Orders are to be displayed at the gate. If these are not available or circulated submit a written request to the good offices of your appointing authority, MD, Head-HR,   to supply these to you by redg post immediately mentioning that these are not available at HR page, gate and with HR personnel Mr/Ms…… and are not circulated to you till date ( and other employees if it is true).

 

It is felt that such a clause shall be against the certified standing orders of the company.

Take care of non disclosure principle. Do not disclose salary of employees, manufacturing formulae etc. in writing or on any kind of record.


Attached File : 820503842 negative covenant in contract of employment.pdf downloaded: 440 times

V. VASUDEVAN (LEGAL COUNSEL)     06 February 2012

Please follow the advice of Adv. Bharat Chugh. 

Kumar Doab (FIN)     06 February 2012

Please follow the advice of learned Mr Bharat Chugh.,and Mr. Vasudevan.

H. S. Thukral (Lawyer)     06 February 2012

If you are not leaving the job during contract period then there can not be restriction in joining other employer in same trade. If you have a contract to work with the employer for a period and you intend to leave before completing the same , restriction shall apply. 

Raj Kumar Makkad (Adv P & H High Court Chandigarh)     06 February 2012

Even if such a condition had been stipulated in the original appointment offer(not to take up employment with a Competitor company), it is an 'unfair & unreasonable' condition, somewhat analogus to a condition that says a worker 'should not join a trade union'. There is no specific law other than the general law of contracts & equity to seek legal redressal / remedy. In my personal opinion, this kind of contract in a very broad context " defeats or goes against public policy " & is therefore void in law. It could also be voidable as far as your friend's situation goes, i.e. he can even after signing such a contract opt out of it at a later date,while observing all other conditions forming part of the appointment offer including the non-disclosure agreement.

 

In fact the non-disclosure agreements are also seen under a microscopic lens by courts to check if there are 'justifiable & genuine grounds' in the clauses / conditions contained in it as also the 'category of employment / industry' to which it applies.

H. S. Thukral (Lawyer)     06 February 2012

Thanks Mr. Kumar Doab for inviiting me to answer the query. Since you are an Advocate I will suggest two Supreme Court citations on the subject but on different facts. My answer is based on those.

Niranjan Shankar Golikari vs The Century Spinning And Mfg. Co 1967 AIR 1098

Superintendence Company Of India ... vs Krishan Murgai 1980 AIR 1717 

H. S. Thukral (Lawyer)     06 February 2012

Mr. Makkad 

any negative covenants in the contract can be enforced during the contract but not after the termination of contract. therefore if an employee leave during the contract period, such clasue can be enforced against him. 

Mayuresh M (Engineer)     09 February 2012

Hello All,

Thanks for your reply. I would like to clear some points:

1) There is no bond, and company can be left anytime by giving notice of 3 moths otherwise paying the penalty.

The clause which is voidable and which is main subject of this thread is saying that
"Employee is not allowed to join the competitors firm (i.e. having same product) for at least two years AFTER LEAVING THE ORGANIZATION"

2) Mr Bharat and all other respectives have given good replies. Just I would like to know that, if it is necessary two send a company a legal notice regarding the illegality of the clause above.

If I join the competitors firm after leaving the current company by following proper rules, is the current company has rights to take action against me?

Thank you All

Kumar Doab (FIN)     13 February 2012

Many thanks to learned Mr. Thukral, Mr. Makkad,Mr. Vasudevan,Mr.Chugh for their valubale guidance on this interesting thread.Your inputs have enriched the forum.

Jermaine Decker   06 August 2018

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