Hi,
I was working in the recruitment industry (Manpower consultancy) where there was a clause mentioned in the appointment/agreement letter stating that after quitting the organization, I am not supposed to join or set up my own recruitment industry (Manpower consultancy) until 1 year. If I do so, I am liable to pay a 2 lakh penalty.
Kindly let me know whether this clause is valid under human rights.
From India, Bengaluru
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I was working in the recruitment industry (Manpower consultancy) where there was a clause mentioned in the appointment/agreement letter stating that after quitting the organization, I am not supposed to join or set up my own recruitment industry (Manpower consultancy) until 1 year. If I do so, I am liable to pay a 2 lakh penalty.
Kindly let me know whether this clause is valid under human rights.
From India, Bengaluru
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See this is legally a difficult concept and derives its powers from Indian Contract Act :
Under Section 27 of Indian Contract Act,
Agreement in restraint of trade :—Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent 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."
Exception 1.—Saving of agreement not to carry on business of which goodwill is sold.—One who sells the goodwill 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 goodwill 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.
Thus in your case and in my opinion the contract above mentioned will be void. See the website below for more
From India, Kolkata
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186Under Section 27 of Indian Contract Act,
Agreement in restraint of trade :—Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent 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."
Exception 1.—Saving of agreement not to carry on business of which goodwill is sold.—One who sells the goodwill 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 goodwill 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.
Thus in your case and in my opinion the contract above mentioned will be void. See the website below for more
From India, Kolkata
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Enforcement of negative covenants in employment terms.pdf
Working with communities.ppt