Riteshmaity
Labour Law Advocate
+1 Other

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Hi,
I was working in a recruitment industry (Manpower consultancy) where there was a clause mentioned in appointment/agreement letter stating that after quiting the organisation i am not suppose to join or setup my own recruitment industry (Manpower consultancy) till 1 year and if i do so i am liable to pay 2 lacs penalty.
Kindly let me know whether this clause is valid under human rights.

From India, Bengaluru
See this is legally a difficult concept and derives its powers from Indian Contract Act :

Under Section 27 of Indian Contract Act,

Agreement in restraint of trade :—Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void. —Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void."

Exception 1.—Saving of agreement not to carry on business of which goodwill is sold.—One who sells the goodwill of a 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 a like business therein, provided that such limits appear to the Court reasonable, regard being had to the nature of the business.

Thus in your case and in my opinion the contract above mentioned will be void. See the website below for more

From India, Kolkata
Such clause has no legal validity. Once can set up his own consultancy firm one day after his cessation of employment.
From India, Kolkata
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