Meenakshi Shukla
On 25th June, 2025, the Delhi High Court set aside an injunction that had barred a former employee, Varun Tyagi, from joining Digital India Corporation (DIC) after resigning from Daffodil Software Pvt. Ltd. The Court held that the post-employment non-compete clause invoked by Daffodil was void under Section 27 of the Indian Contract Act, 1872, which prohibits any agreement restraining a person from engaging in a lawful profession, trade, or business.
Justice Tejas Karia rejected the contention that the restriction was reasonable or partial, stating that Indian law does not permit even a partial restraint on trade post-employment unless it falls under the statutory exception. The Court noted that
“Any terms of the employment contract that impose a restriction on the right of the employee to get employed post-termination of the contract of employment shall be void, being contrary to Section 27 of the Indian Contract Act, 1872.”
The Court also pointed out that DIC, the organisation Tyagi had joined, was itself the rightful owner of the project’s intellectual property, making the former employer’s claim of potential data leakage baseless. It was observed that:
“The apprehension of the Respondent that confidential information or intellectual property shall be shared with DIC is misconceived as the same already belongs to DIC.”
Rejecting the trial court’s injunction order that had restrained Tyagi from working with DIC and National E-Governance Division (NeGD), the High Court stated that such an order effectively forced the employee to either return to his former employer or remain unemployed. It quoted from previous jurisprudence that:
“Freedom of changing employment for improving service conditions is a vital and important right of an employee, which cannot be restricted or curtailed.”
Justice Karia also noted that:
- The POSHAN Tracker project’s intellectual property was owned by DIC, not Daffodil.
- The Respondent was merely supplying manpower and did not create proprietary software.
- Tyagi’s continued employment with DIC would not breach any valid confidentiality obligation.
With this ruling, the High Court reiterated that post-employment restraints not saved by statutory exceptions are unenforceable, and any attempt to block an employee from moving to a new job purely on the basis of a non-compete clause is contrary to public policy and law.
Case Name: Varun Tyagi v. Daffodil Software Private Limited
Case Number: FAO 167/2025 & CM APPL. 36613/2025
Bench: Justice Tejas Karia
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