“Lock the Safe, Not the Employee”: Delhi High Court Reaffirms That Non-Compete Clauses Are Void Post-Employment.
In the recent decision of the Delhi High Court in Varun Tyagi v. Daffodil Software Pvt. Ltd., 2025 SCC OnLine Del 4589, the Court has once again clarified the legal position that has remained constant for decades—non-compete clauses in employment contracts are void in India once the employment relationship comes to an end.
The ruling arose when an employee, deputed by his employer to work on a government project, resigned and joined the government body directly. The employer sought to restrain him under a contractual clause that barred employment with any “business associate” for three years post-termination. While an interim injunction was initially granted by the District Court, the High Court, applying Section 27 of the Indian Contract Act, 1872, struck down the restriction, holding that it was a restraint of trade and hence unenforceable.
This judgment does not create new law. It reaffirms what the Supreme Court has long held—that negative covenants are enforceable during employment, but once the contract terminates, the employee’s right to livelihood must prevail. The constitutional underpinnings of this doctrine lie in Article 19(1)(g), which guarantees the right to practise any profession or carry on any trade, subject only to reasonable restrictions in the public interest, and Article 21, which the Supreme Court has expansively interpreted to include the right to livelihood. To permit private employers to enforce post-employment non-compete clauses would, in effect, allow contracting away of these fundamental rights—something the Constitution does not permit.
At the same time, courts have been consistent in recognising that employers are entitled to protect legitimate business interests. Confidentiality clauses survive termination if they are precisely drafted. Non-solicitation clauses, narrowly framed to prevent former employees from luring clients or colleagues, have been upheld in multiple decisions, including Wipro v. Beckman Coulter and Desiccant Rotors v. Bappaditya Sarkar. Garden leave clauses have also been judicially accepted, provided the employee remains on the payroll during the notice period. Similarly, intellectual property created during the course of employment can, and should, be contractually secured in favour of the employer.
For Indian startups and companies, the message is clear. Reliance on broad, foreign-inspired non-compete clauses is misplaced and creates a false sense of security. The better strategy is to focus on enforceable mechanisms: confidentiality, non-solicitation, intellectual property ownership, and garden leave. Courts will enforce these protections because they safeguard the employer’s property and business interests without curtailing the employee’s constitutional right to work.
The decision in Varun Tyagi is a timely reminder that in India’s legal landscape, employers cannot chain an employee once they have chosen to leave. What they can—and must—do is lock the safe that contains their proprietary information, clients, and intellectual property. That is the legally sound way to protect business interests in a knowledge-driven economy.
