Indian law is very restrictive in the matters of restricting an employee to be bounded by the terms of any written contract. It provides the freedom to an employee to leave a job, join a new one for better salary and better service conditions. The major laws dealing with employment contracts in india are Indian Contract Act, 1872, Specific Relief Act, 1963 Indian Penal Code and Constitution of India. Some of the most common questions posed by the employers or HR personnel for employment contracts are:
A: No, A person cannot be compelled to work against his free will. Such a completion is violation of Article 19 and 21 of constitution of india, which provides freedom of trade and profession and Right to life and Personal Liberty.
Q: Can the Company/ Employer claim the damages for breach of contract?
A: Yes & No. If the employee does not serve the notice period mentioned in the employment contract before leaving the job, the Company can claim the money mentioned in the contract in the absence of notice period. Secondly, if the Company has provided any kind of technical of professional training to the employee then as per the terms of contract such expenses can be recovered from the employee too. In any other case any kind of unreasonable damage would not be allowed to be recovered.
Q: Can the employer restrain the employee from working for any other employer during the period of employment with him.
A: Yes, as per section 42 of Specific Relief Act, 1963 relief can be granted in terms of non-performance of a particular act if has been contracted so.
Q: What is the validity of confidentiality clause?
A: Supreme Court of India in Percept D’ Mark (India) Pvt. Ltd V Zaheer Khan, in which the observed that under Section 27 of the Indian Contract Act a restrictive covenant extending beyond the term of the contract is void and not enforceable. Thus, as long as the term of employment continues the employee if has agreed to confidentiality clause will be bonded with that, but once he left the job he cannot be enforced to comply the confidentiality clause.
Q: Can the Employer prohibit the employee from joining the competitor for a certain period of time?
A: No, In Pepsi Foods Ltd & Ors V Bharat Coca-cola holdings Pvt. Ltd. Delhi High Court cited In a free market economy, everyone concerned, must learn that the only way to retain their employees is to provide them attractive salaries and better service conditions. The employees cannot be retained in the employment perpetually or by a Court injunction.
The concluding section is section 27 of Indian Contract Act, 1872 & section 42 of Specific Performance Act, 1963 and Article 19, 21 and 23 of Indian Constitution.
Section 27 of Indian Contract Act:
Agreement in restraint of trade void.- Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void. Saving of agreement not to carry on business of which good- will is sold.- Exception 1.- One who sells the good- will 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 good- will 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.
Section 41 of Specific Relief Act, 1963:
Injunction when refused.- An injunction cannot be granted-
(a) to restrain any person from prosecuting a judicial proceeding pending at the institution of the suit in which the
injunction is sought, unless such restraint is necessary to prevent a multiplicity of proceedings;
(b) to restrain any person from instituting or prosecuting any proceeding in a court not subordinate to that from which the injunction is sought;
(c) to restrain any person from applying to any legislative body;
(d) to restrain any person from instituting or prosecuting any proceeding in a criminal matter;
(e) to prevent the breach of a contract the performance of which would not be specifically enforced;
(f) to prevent, on the ground of nuisance, an act of which it is not reasonably clear that it will be a nuisance;
(g) to prevent a continuing breach in which the plaintiff has acquiesced;
(h) when equally efficacious relief can certainly be obtained by any other usual mode of proceeding except in case of breach of trust;
(i) when the conduct of the plaintiff or his agents has been such as to disentitle him to the assistance of the court;
(j) when the plaintiff has no personal interest in the matter.
Section 42 of Specific Relief Act, 1963:
Injunction to perform negative agreement.- Notwithstanding anything contained in clause (e) of section 41, where a contract comprises an affirmative agreement to do a certain act, coupled with a negative agreement, express or implied, not to do a certain act, the circumstance that the court is unable to compel specific performance of the affirmative agreement shall not preclude it from granting an injunction to perform the negative agreement: Provided that the plaintiff has not failed to perform the contract so far as it is binding on him.
Article 19(1)(g) of Constitution of India 1949:
To practise any profession, or to carry on any occupation, trade or business
Article 21 in The Constitution Of India 1949
Protection of life and personal liberty No person shall be deprived of his life or personal liberty except according to procedure established by law
Article 23 in The Constitution Of India 1949
Prohibition of traffic in human beings and forced labour
(1) Traffic in human beings and begar and other similar forms of forced labour are prohibited and any contravention of this provision shall be an offence punishable in accordance with law
(2) Nothing in this article shall prevent the State from imposing compulsory service for public purpose, and in imposing such service the State shall not make any discrimination on grounds only of religion, race, caste or class or any of them
Related Case Laws :
2. Superintendence Company Of India vs Krishan Murgai
3. American Express Bank Ltd. vs Ms. Priya Puri on 24 May, 2006
4. Vfs Global Services Private vs Mr. Suprit Roy on 10 December, 2007
5. Desiccant Rotors International Pvt Ltd v Bappaditya Sarkar & Anr
6. Polaris Software vs suren:
· The writer shall not be liable for any direct or indirect damages caused to any person acting solely on/based upon the information provided herein.
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