Delhi High Court (Delhi HC) has held that an individual cannot be forced to either return to a former employer or remain unemployed due to restrictive post-employment clauses.
The judgment, delivered by Justice Tejas Karia in the case of Varun Tyagi v. Daffodil Software Private Limited, strikes down a non-compete clause as violative of Section 27 of the Indian Contract Act, 1872, which prohibits agreements that restrain lawful professions, trades, or businesses.
Case Background: From Software Engineer to Legal Battle
The petitioner, Varun Tyagi, was employed as a software engineer with Daffodil Software Pvt. Ltd. from January 2022 to April 2025.
During his tenure, he worked on the government’s POSHAN Tracker project—a national initiative aimed at improving child nutrition—through the Digital India Corporation (DIC).
After serving his notice period, Varun joined DIC directly as Deputy General Manager on April 8, 2025.
However, Daffodil Software filed a suit alleging breach of contract by Varun.
The company cited a non-compete clause that barred him from working with its “business associates” for three years after termination.
The company obtained an interim injunction from a district court on June 3, restraining Varun from working with DIC and the National E-Governance Division (NeGD).
Analysis by Delhi HC: Section 27 and the Right to Livelihood
Justice Tejas emphasized that post-employment restrictions are subject to strict scrutiny under Indian law.
Unlike English law, which allows for partial restraints if deemed reasonable, Indian jurisprudence does not recognize such distinctions.
The Court clarified, “The reasonableness and whether the restraint is partial or complete is not required to be considered at all when an issue arises as to whether a particular term of contract is or is not in restraint of trade, business or profession.”
The Court held that non-compete clauses operative after termination are void under Section 27, as they infringe upon an individual’s right to livelihood.
It further noted that employees often sign standard-form contracts under duress, with little room for negotiation, making such clauses inherently imbalanced.
Key Observations by Delhi HC: Protecting Employee Autonomy
Justice Tejas made several critical observations:
- An employee cannot be compelled to choose between returning to a former employer or remaining idle.
- Any clause that restricts post-employment opportunities is unenforceable under Indian law.
- The distinction between employment-period restrictions and post-employment restraints is crucial, with the latter being far less defensible.
The Court also referenced Supreme Court precedents that affirm the freedom to work as a fundamental right.
It emphasized that this right cannot be curtailed by private agreements that violate public policy.
Implications: A Win for Employee Rights
This ruling sets a strong precedent for future employment disputes involving non-compete and non-solicitation clauses.
It reinforces the idea that employers cannot monopolize talent or restrict individual freedom.
Former employees must be free to pursue legitimate career opportunities, especially in fields like technology and public service.
Legal experts believe the judgment will encourage companies to revisit employment contracts and ensure compliance with Indian contract law.
It also provides clarity for employees transitioning between roles, particularly in government-linked projects and high-skill industries.
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