One of my clients recently had a case which I am explaining below and if you are stuck in such similar situation, here is what to do.

Note: Due to attorney-client privilege, I cannot disclose complete case details or identify the actual parties involved. However, I am sharing the essential facts and legal approach so that if you find yourself in a similar situation, you can understand the available solutions and legal remedies.

Mr. X was working as a technical writer at a startup in City A. The company was performing well when the founder, Mr. Y, decided to start a new venture. Mr. Y invited Mr. X to join his new company, which was registered abroad and operated fully remotely. The employment contract included a non-compete clause preventing Mr. X from working with competitors for two years. After six months, Mr. X received a better offer from another company and resigned. Mr. Y threatened legal action, claiming the non-compete clause was binding and enforceable in India despite the company being foreign-registered. Mr. X approached our firm seeking clarity on whether such clauses could be enforced against Indian employees by foreign companies.

Advice in Such Cases

Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation to come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think.

Review your employment contract thoroughly to understand the specific terms and jurisdiction clauses. Document all communications with the employer regarding the non-compete clause. Gather evidence of the company’s actual operations and whether they have legitimate business interests in India that the clause aims to protect.

Applicable Sections of Law

Under Indian law, Section 27 of the Indian Contract Act, 1872, makes agreements in restraint of trade void, which includes most non-compete clauses. The Bharatiya Nyaya Sanhita (BNS) Section 318 deals with criminal breach of contract by servants, while Section 405 covers criminal breach of trust. The Bharatiya Nagarik Suraksha Sanhita (BNSS) Section 173 governs investigation procedures if criminal charges are filed. Additionally, the Foreign Exchange Management Act (FEMA) may apply to employment contracts with foreign entities.

If You Are the Complainant

• File a complaint under Section 27 of the Contract Act challenging the enforceability of the non-compete clause
• Approach the appropriate civil court with jurisdiction over employment contract disputes
• Gather documentation proving the restraint of trade and its impact on your livelihood
• Seek interim relief to prevent the employer from taking coercive action
• Consider approaching labor courts if the employment relationship falls under labor law provisions

If You Are the Victim

• Immediately document any threatening communications or coercive actions by the employer
• Review the employment contract to identify unreasonable restrictions and void clauses
• Preserve all employment records, emails, and contract documents as evidence
• Avoid signing any additional agreements that might strengthen the employer’s position
• Seek legal protection if the employer attempts to enforce the clause through foreign courts

How the Police Behave in Such Cases

Police typically view non-compete disputes as civil matters rather than criminal cases unless there are allegations of fraud or criminal breach of trust. They may be reluctant to register FIRs in pure contract disputes and usually advise parties to approach civil courts. If criminal elements like cheating or forgery are involved, police will investigate under relevant BNS sections, but they often lack understanding of complex employment law nuances.

FAQs People Normally Have

Can foreign companies enforce non-compete clauses against Indian employees? Generally no, as Section 27 of the Contract Act makes such restraints void in India regardless of the employer’s nationality.

What if the contract specifies foreign jurisdiction? Indian courts can still apply Indian law if the employee is Indian and the work affects Indian interests.

Are there any exceptions to the non-compete rule? Very limited exceptions exist for sale of goodwill of business, partnership agreements, and during employment (not post-employment).

Can I be sued in foreign courts? Possibly, but enforcement in India would still be subject to Indian law and public policy considerations.

What Evidence Is Required?

• Original employment contract with non-compete clauses
• Communication records regarding the clause enforcement
• Evidence of the company’s business operations and Indian connections
• Documentation of financial impact on employee’s livelihood
• Proof of employer’s legitimate business interests (or lack thereof)
• Records of similar industry practices and standards
• Expert opinions on reasonableness of restrictions

How Long Will the Investigation Take?

Civil proceedings for contract disputes typically take 2-5 years depending on court workload and case complexity. If criminal elements are involved, police investigation may take 6-12 months, followed by trial proceedings. Appeals can extend the timeline significantly. Interim relief applications are usually decided within 2-6 months, providing temporary protection during the main case proceedings.

Advocate Sudhir Rao, Supreme Court of India