A.
Dear Client,
The enforceability of non-compete clauses in India is primarily governed by Section 27 of the Indian Contract Act, 1872, which states that any agreement restraining an individual from practicing a lawful profession, trade, or business is void. The law states that an agreement will be illegal only if it restrains someone from exercising a lawful profession/ trade/ business. As per the mandate of Section 27 of the Indian Contract Act,1872, any terms and conditions of an agreement that directly or indirectly compel the employee to serve the employer or put a restriction on them joining the competitor or other employer are not valid. The employee has the right to resign from employment even if he has agreed to the employment bond to serve the employer for a specific period. In the case where the employer can prove that the employee is joining the competitor to disclose the trade secret, then the court may issue an injunction order restricting the employee from joining the competitor. Further, Section 73 of the Act makes provision for un-liquidated damages (not stipulated in a contract), Section 74 deals with liquidated damages (stipulated in a contract), and no compensation is attracted for mere breach of contract u/s.73 and 74 of the Act unless such breach resulted in an actual loss or damage to the opposite party employer. In the given scenario, if you are not holding a position of manager or supervisor in the Company, but a workman as defined under Sec.2(s) of the Industrial Dispute Act, 1947, serving a legal notice to the Company, reach out to the office of the concerned Labour Commissioner or the office of the Chief Inspector, Shops and Establishments, as the case may be, to file a complaint against the company over alleged unfair labour practice for redressal of your grievance. Apart from this, you can file an application under Section 33C(2) of the Industrial Disputes Act, 1947 before the State Labour Court claiming your dues(F & F settlement dues) from the Company. But, if you are holding the position of Manager or Administrator in the Company, you have to file a civil suit against the Company before the Civil Court seeking appropriate relief in the matter. An organization/establishment with a workforce of 10 individuals and above is liable to pay gratuity under the Payment of Gratuity Act 1972. Under Section 4(1) of the Act, the gratuity must be paid to an employee upon cessation of employment if he or she has rendered continuous service for five years or more. In case of denial of gratuity or short-payment of gratuity by the employer despite the eligibility of an employee who serve more than 5 years continuously, serving a legal notice to the Company/employer, reach out to the office of the concerned Labour Commissioner and the Controlling Authority under the Act to file a complaint against the employer over irregularities or short-payment of gratuity under the Payment of Gratuity Act, 1972 despite your eligibility to redress the grievance. Under Sub-Sec. 5 of Section 7 of the Act, the Controlling Authority is empowered under the Code of Civil Procedure, 1908, to try the claim of the applicant and pass an order/direction on the claim petition. It is recommended to consult with an Advocate experienced in service and social security laws to navigate the issue in the right way.
Posted On 28-Apr-2025
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