Law:

Section:

(a) Contract Act (IX of 1872)-------S. 27---Specific Relief Act (I of 1877), S.57---Restrictive covenant---Scope--Any agreement by which any lawful profession, trade or business is restrained is void under S.27 of Contract Act, 1872, as such the same is subject to an exception contained in S.57 of Specific Relief Act, 1877, according to which agreement restraining carrying on a business after sale of goodwill is exempt from operation of S.27 of Contract Act, 1872---Basic principle was that any restraint on trade clause would be, prima facie, void unless the same was justified to be reasonable between the parties and not inimical to public interest. (b) Contract Act (IX of 1872)--- ----S. 27---Specific Relief Act (I of 1877), S.57-Restrictive covenant--Applicability---Principles. Following are the principles for application of restrictive covenant:-- (a) a restraint of trade clause is void if unreasonable, however, if the same is reasonable the said clause is valid; (b) a reasonable restraint of trade clause whereby an employee is prevented from entering into competition with his former employer or entering into an employment in same/ similar business with a competitor of former employer, can be enforced by Court. The said enforcement can include a declaration or injunction or both, as the case may be; (c) reasonableness of the clause .will vary from case to case and will inter alia, depends upon the following:-- (i) the extent of duration; (ii) the extent of the geographical territory. (d) the employer will only be able to obtain an injunction for information, know-how and details of customers/orders acquired by employee the through some classified or secret information. However, no injunction would be obtained if the know-how is not acquired by employee through access of classified or secret information but rather during the normal course of employment; (e) the restraint of trade clause should only be aimed at protecting interest of the employer and not aimed at penalizing the employee or causing him inconvenience; (f) the restraint of trade clause should not be vague and generalized but should be rather specific. In case general a vague part of the…

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