Right to livelihood: employer v employee

Evolution of law to meet the challenges of changing times could arguably be the fundamental principle of justice. When a piece of legislation is interpreted to mete out identical treatment to dissimilar fact-situations it loses touch with reality. One such provision is section 27 of the Indian Contract Act.

Section 27 states that every agreement by which anyone is retrained from exercising a lawful profession, trade or business, is to that extent void.

This section has been the basis for judicial pronouncements such as Gujarat Bottling Company v Coca Cola & others, Niranjan Shankar Golikari v The Century Spinning and Mfg. Co. Ltd, and Percept D’Mark (India) Pvt Ltd v Zaheer Khan, that have held that an employer cannot restrain an employee after termination of employment by imposing a non-compete obligation (though Nirajan Golikari does uphold the right of an employer to protect his trade secrets).

Akila Agrawal is a partner at Amarchand & Mangaldas & Suresh A Shroff Co. The views expressed are those of the author and do not reflect the official policy or position of Amarchand Mangaldas.