The Delhi High Court has ruled that companies cannot legally prevent former employees from joining competing firms or even clients, declaring post-employment non-compete clauses void under Section 27 of the Indian Contract Act. The decision reinforces the right to seek lawful employment as a fundamental constitutional right, setting a clear precedent against overly restrictive employment contracts.
The ruling came in the case of software engineer Varun Tyagi, who had worked on the Indian government’s POSHAN Tracker project during his tenure at Daffodil Software. After serving his notice period and exiting the company in April 2025, Tyagi took up a role with Digital India Corporation (DIC)—a government-owned entity that owns the POSHAN Tracker platform.
However, Daffodil Software moved quickly to enforce a restrictive clause in Tyagi’s employment agreement, which barred him from joining any business associate of the company for a period of three years. The firm successfully obtained an interim restraining order from a district court, preventing Tyagi from taking up his new role. In response, Tyagi challenged the order in the Delhi High Court, arguing that the clause was excessive and violated his right to work.
Delivering the judgement, Justice Tejas Karia overturned the lower court’s decision and sharply criticised the restrictive clause. The court held that forcing an employee to return to their previous job or remain unemployed is not legally or morally acceptable. Emphasising the principle of free trade and profession, Justice Karia stated that post-employment restrictions must not be used to stifle career advancement or economic freedom.
The court further pointed out that Tyagi had neither developed proprietary software nor handled any confidential intellectual property belonging to Daffodil Software. All rights related to the POSHAN Tracker project were held by the government, making the company’s claim to proprietary interest baseless.
In its ruling, the High Court made it clear that while employers may seek damages in the case of contract breaches, they cannot impose employment bans on former employees unless the restriction is meant to protect legitimate proprietary or intellectual property interests. The court also reaffirmed that Indian law permits post-employment restrictions only in cases involving the sale of business goodwill—a narrow and explicitly defined exception under Section 27.
“This ruling sends a strong message to companies that seek to overreach through vague or overbroad contract clauses,” said a senior employment lawyer in Delhi who reviewed the judgement. “It affirms that employees in India cannot be bound by unfair terms once their employment ends, unless there’s a clear case of confidential IP or business goodwill at stake.”
Justice Karia also addressed the argument that non-compete clauses are necessary to protect confidential information. He ruled that such concerns do not justify blanket restrictions on employment, noting that the remedy for confidentiality breaches lies in damages or specific legal recourse—not employment bans.
The decision is being seen as a watershed moment in Indian employment jurisprudence, particularly in the tech and services industries, where non-compete clauses are frequently inserted into contracts—often as a deterrent, not a legitimate legal safeguard.
For thousands of employees in India’s booming IT, consulting, and start-up sectors, the ruling offers reassurance that seeking better opportunities—even with former clients or collaborators—is not a legal offence. Instead, it is a right protected by law.
