Any business lawyer will vouch for the popularity of non-compete and non-solicit agreements as a way, inter alia, to try to limit employees and former employees from working for a competitor or from divulging trade secrets or other proprietary data. In several jurisdictions such as England and Wales, the law has evolved to uphold such agreements, subject mainly to the reasonableness of the limitations imposed by them.
In India, such agreements are governed by the codified provisions of section 27 of the Indian Contract Act, 1872, whereby every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void. The section also contains an exception, applicable to cases where one sells the goodwill of a business. In such cases, the seller of the goodwill of the business may agree with the buyer to refrain from carrying on a similar business, within specified local limits so long as the buyer or any person deriving title to the goodwill from him carries on like business therein. However, such limits must appear reasonable to the court, regard being had to the nature of the business. Where the goodwill of a business is sold without an express agreement as to the vendor refraining from competing with the vendee, the vendor may set up a rival business, but he is not entitled to canvass the customers of the old firm. The grounds for this may be either that a man may not derogate from his own grant, or that the vendor had impliedly contracted not to solicit his former customers, or that it would be fraudulent to do so.
