Non-solicitation & Non-compete Clause – After resignation

The Appellant – IT Engineer was employed on 29.7.2021 as an Associate in the affiliate company of the Respondent.  The Employment Agreement dated 1.1.2022 between the appellant and the respondent provided for non-solicitation and non-compete clause for a period of three years after cession of the employment.

The Respondent was engaged by the DIC as Business Associate for the high-priority government project of POSHAN tracker and public importance.  The Appellant was assigned as a full stack developer with the said Project, underwent extensive specialized training and made considerable investment.   Owing to his enhanced expertise, the appellant was elevated to a leadership role.

On 6.1.2025, the appellant resigned and gave three months’ notice.

On 27.3.2025, the appellant was offered job as General Manager with DIC and accepted the same from 8.4.2025.

The Respondent, therefore, filed suit for permanent injunction and damages.  The trial Court allowed the interim injunction application restraining the appellant from working with DIC and NeGD and from sharing the confidential information.

HELD that the employment agreement stood terminated on 7.4.2025 and the IP rights belongs to DIC and not the Respondent. The scope of work between the DIC and the Respondent was limited to the supply of manpower or technical personnel.   Clause 2.16 of the Employment Agreement read with the definition of Business Associate is worded as blanket prohibition or ban on the Appellant from working with the existing or potential customers.   Any form of restraint, whether partial or absolute, becomes legally inapplicable once the Appellant was relieved from service upon completion of stipulated 90 days’ notice period.

Para 66 of the judgment – An employee cannot be confronted with the situation whether he has to either work for the previous employer or remain idle.  An employer – employee contracts, the restrictive or negative covenant are viewed strictly as the employer has an advantage over the employee and it is quite often the case that the employee has to sign the standard form contract or not be employed at all.

Para 72 – The apprehension of the Respondent that confidential information or intellectual property shall be shared with DIC is misconceived as the same already belongs to DIC.    Therefore, there is no question of any sharing of the confidential information, source code or intellectual property with DIC.

In case, the Respondent can prove the breach of the Employment Agreement, it can be compensated by way of damages at the trial of the suit.

Judgment dated 25.6.2025 of the High Court of Delhi in FAO 167/2025 of Varun Tyagi   Vs.  Daffodil Software Pvt Ltd