This is one of the clearest differences between Indian law and the law most template contracts are copied from.
The provision
Section 27 of the Indian Contract Act, 1872: every agreement by which any person is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void. The only statutory exception is the sale of goodwill of a business, within reasonable local limits.
Unlike English law, India does not save a restraint merely because it is reasonable. In Superintendence Company of India v. Krishan Murgai and the line of cases following it, courts have consistently struck down post-termination non-competes.
The distinction that decides these cases
- During employment: a clause preventing you from working for a competitor while still employed is enforceable. It is a term of service, not a restraint of trade. Exclusivity clauses and garden leave fall here.
- After employment ends: a clause preventing you from joining a competitor, or setting up on your own, is void under Section 27, however short the period or narrow the geography.
Three things survive: confidentiality, because protecting trade secrets and proprietary information is not a restraint on trade; non-solicitation of clients and employees, which courts have enforced where narrowly drawn, though the position is not uniform; and IP assignment, which is enforced routinely. A well-advised employer relies on these, not on a non-compete.
If you have signed one
Do not assume it binds you, and equally do not assume you can ignore the rest of the contract. What follows you after you leave is the duty of confidence and, often, a non-solicitation obligation. Taking client lists, source code, pricing data or databases is a genuine exposure, and can attract liability under the Information Technology Act, 2000 as well as in contract.
Sale of a business is different
Where you sell your business and its goodwill, a non-compete against you is valid within reasonable limits, because the buyer is paying for the goodwill. That exception is expressly in Section 27 and it is routinely enforced.