Why Your Non-Compete Clause Probably Won't Hold Up
A 2025 Delhi High Court judgment confirms something most Indian founders don't realise until it's tested in court: the standard post-termination non-compete clause sitting in your employment or founder agreements is very likely void — regardless of how carefully it was worded.
The clause everyone copies
Almost every Indian employment contract, and most co-founder agreements, include some version of this: "the employee/founder shall not, for a period of [X] months after leaving, engage in any competing business within [territory]."
It reads like solid legal protection. It usually isn't.
The case that confirms it
In Varun Tyagi v. Daffodil Software Pvt. Ltd., 2025 SCC OnLine Del 4589, the Delhi High Court reaffirmed a long-settled line of authority, including Superintendence Co. v. Krishan Murgai and Percept D'Mark v. Zaheer Khan: post-termination restraints on trade are void under Section 27 of the Indian Contract Act, 1872 — full stop, "whether partial or complete."
The misconception this corrects
A common belief — repeated across many templates and even some legal blogs — is that a non-compete becomes enforceable if it protects a "genuine proprietary or confidential interest." This isn't accurate. In the Varun Tyagi case, the employer specifically argued this, claiming the departing employee had access to proprietary technology. The court's discussion of "proprietary interest" was to reject that factual claim — not to create a legal exception that would apply more broadly.
So what actually works?
Two things carry real, meaningfully higher enforceability, and they're the ones worth actually relying on:
1. Confidentiality clauses. Protecting genuinely confidential information isn't a "restraint of trade" under Section 27 — it's a separate, well-established obligation that survives departure.
2. Narrow non-solicitation clauses. Preventing a departing employee from actively poaching specific clients or colleagues they had direct contact with is a meaningfully narrower restriction than a blanket non-compete, and Indian courts have shown more willingness to enforce it — though even here, breadth matters (a restriction on "any client" rather than clients with direct contact has been struck down as overbroad in recent cases).
Check your own agreement
Our free Contract Health Checklist covers this exact gap, along with 9 other common red flags.
Try the Contract Health Checklist →Sources: Varun Tyagi v. Daffodil Software Pvt. Ltd., 2025 SCC OnLine Del 4589 (Delhi HC, 25 June 2025); Superintendence Co. of India v. Krishan Murgai, (1981) 2 SCC 246; Percept D'Mark (India) Pvt. Ltd. v. Zaheer Khan, (2006) 4 SCC 227; Section 27, Indian Contract Act, 1872. This is general legal information, not legal advice — consult an enrolled advocate for your specific situation.