Is It Fair to Restrict My Career After Leaving a Job? Seeking Advice on Legal Clauses

Hi,

I was working in the recruitment industry (Manpower consultancy) where there was a clause mentioned in the appointment/agreement letter stating that after quitting the organization, I am not supposed to join or set up my own recruitment industry (Manpower consultancy) until 1 year. If I do so, I am liable to pay a 2 lakh penalty.

Kindly let me know whether this clause is valid under human rights.

Understanding Restraint of Trade in Indian Contract Law

See, this is legally a difficult concept and derives its powers from the Indian Contract Act.

Under Section 27 of the Indian Contract Act:

Agreement in Restraint of Trade

"Every agreement by which anyone 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 mentioned above will be void. See the website below for more.

Such a clause has no legal validity. One can set up his own consultancy firm one day after his cessation of employment.

Thank you.