Non-disclosure agreements in employment contracts

The emerging role of know-how and innovative ideas in the success of companies in India has resulted in an increasing reliance on restrictive covenants, primarily aimed at preventing present and former employees from disseminating sensitive information to the detriment of the employer.

Restrictive covenants in employment contracts can be contentious, post cessation of employment, since they often conflict with section 27 of the Indian Contract Act, 1872, which restricts agreements in restraint of trade (and thus non-compete provisions post cessation of employment). Courts in India have increasingly upheld the validity of such restrictive covenants and enforced them.

In a leading decision in this regard, Delhi High Court in Burlington Home Shopping v Rajnish Chibber (1995) held that a list of customers prepared by the plaintiff company amounted to a trade secret, and granted an injunction restricting a former employee of the company who had been using the list (identically same) to set up his own clientele in a similar business.

Cyril Amarchand Mangaldas is India’s largest full-service law firm. Manishi Pathak is a partner at the firm.