Facing Legal Threats from Former Employer for Starting a Similar Business – What Are My Options?

Hi, I used to work for a company that did not provide me with any joining letter or experience letter. Even the salary was given to me in cash, which was very low considering I have an MBA. After 6 months, they gave me a 100 Rs bond paper, stating it as a contract and compulsory to sign if I wanted to retain the job. I signed it under duress as it was my first job, but later had to quit due to frustration. After completing one year, they refused to provide me with a relieving or experience certificate. Now, I have established a business similar to theirs, and they have threatened me with legal action based on that contract. Their lawyer is asking me to pay 30 lakhs as compensation. What should I do?

Dear Swapnil,

Please refer to the links below. No one can force you to stop your business even if it is the same as your previous employer.

- [Manupatra Articles](http://www.manupatrafast.com/articles/PopOpenArticle.aspx?ID=a6cfd61d-d7de-48a7-a093-3f14098affb5&txtsearch=Subject:%20Contract )
- [Non-Compete Clauses and The Indian Contract Act, 1972](http://www.lawyersclubindia.com/articles/Non-Compete-Clauses-and-The-Indian-Contract-Act-1972-4621.asp#.Vrw0UPl95kg)

Thank you.

Dear Swapnil,

You have written that, "[After 6 months they gave me a 100rs bond paper stating it as a contract and compulsory to sign if I have to retain the job]." We need to know the contents of the bond. Secondly, roughly what are the main contents of the lawyer's notice?

Thanks,

Dinesh Divekar

Legal Advice for Compensation Demand

First, seek appropriate legal advice from a local lawyer. As a learned member above has questioned, what is the wording of the contract? What type of business have you started? No one can stop you from starting a competing business; you just cannot use your previous employer's data as a base. There are posts in this forum regarding similar problems; use the search button to get an idea. The Contract Act protects you to some extent while giving duties to obey the contract signed of free will. Your lawyer will see all aspects of the case, all papers, and give you the right advice.

@swapnil, You are a qualified person, hope you might have read the contents of the bond. Also, you may be aware of any other documents you have signed. First of all, no one can force you to sign any such document which you don't want to. Secondly, it is business, and you can be challenged, but be assured that if you have not signed any such document which can be put in as evidence against you, you need not to fear. Advice: hire a good lawyer and seek advice.

Thank you for your references. The main clause of that agreement that I violated, according to their lawyer, was as follows:

1) "In the event the employee leaves the service of the company in breach of the agreement, he shall not serve in any capacity whatsoever or be associated with any person, firm, or company carrying on such business for the remainder of the said period (3 Years). In addition, he must pay the company as liquidated damages an amount equal to the salary the employee would have received during the period of sixty months as calculated based on the last drawn salary and shall further reimburse the company for any amount spent on training."

2) They are thinking that I have joined hands with their competitors, informing their secrets, and approaching their clients. Whereas, the truth is I have established my company on my own, and all my clients are earned through my marketing activities. My products/models are different from theirs.

3) They are claiming heavy losses and have asked me to pay 60 months' salary based on my last drawn salary. They requested the payment within 7 days, threatening to take legal action if the payment is not made. This letter was received in September 2015, and there have been no updates since.

I consulted my lawyer, and he advised me not to worry about this notice. He suggested filing a case against them for threatening me to pay the above amount and for obstructing my choice of career.

I am a startup and do not want any hassles right at the beginning of my business career. So, I am just waiting to complete the 3 years. I left that company in October 2013. This post was to clarify whether I should wait or proceed to build my business.

As a fresher, no one wanted to leave the job after 6 months as it would affect further progress badly. I had two options: either to sign or to quit the job.

@nathrao: Mine is an electronic trading company. My previous company is a manufacturer and trader of similar components. My models are completely different from theirs.

Swapnil,

What products was the company dealing with in electronic trading, and what are you planning to deal with? Please provide details.

You are legally entitled to start your own business. Other than divulging your previous employers' secrets, trademarks, etc., the concept of free business applies. Carry on with your job and build up the business.

Take your lawyer's advice, and if needed, seek a second opinion from another lawyer. This is a classic way of keeping ex-employees under pressure.