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2025 SCC OnLine Del 4589

In the High Court of Delhi at New Delhi

(BEFORE TEJAS KARIA, J.)

Varun Tyagi … Appellant;

Versus
Daffodil Software Private Limited … Respondent.
FAO 167/2025 and CM APPL. 36613/2025§
Decided on June 25, 2025
Advocates who appeared in this case:
For the Appellant : Mr. Asav Rajan, Mr. Ajay Sharma, Mr. Mayank
Biyani, Mr. Akash Saxena, Mr. Kashish Sharma & Mr. Devang Shrodriya,
Advocates.
For the Respondent : Mr. Divyakant Lahoti, Ms. Vindhya Mehra, Ms.
Tanisha Verma, Mr. Raghav Saluja & Mr. Kartik Lahoti, Advocates.
The Judgment of the Court was delivered by
TEJAS KARIA, J.:— The Appellant has filed the present Appeal under
Section 104 read with Order XLIII Rule 1(R) of the Civil Procedure
Code, 1908 (“CPC”), being aggrieved by the order dated 03.06.2025
(“Impugned Order”), passed by the learned District Judge-06
(South), Saket Courts, South Delhi (“Trial Court”) in CS DJ 353/2025
(“Suit”).
2. The Impugned Order has allowed an interim injunction in favour
of the Respondent restraining the Appellant from working with Digital
India Corporation (“DIC”) and National E-Governance Division
(“NeGD”) until the final disposal of the Suit filed before the learned
Trial Court.
3. Vide the impugned order, it was held that the Respondent had a
prima facie case against the Appellant, the balance of convenience lay
in favour of the Respondent and if the alleged proprietary information,
intellectual property, insider knowledge, source code, as the case
maybe, is disclosed by the Appellant, the same shall be detrimental to
the Respondent and its employees and will result in an irreparable
injury to the Respondent.
FACTUAL BACKGROUND:
4. The dispute has arisen out of the Employment of the Appellant
with the Respondent. The Appellant is an Information Technology
Engineer and was employed as an Associate in the affiliate company of
the Respondent on 29.07.2021, and was transferred to the employment
of the Respondent on 01.01.2022. An Employment Agreement dated
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01.01.2022 (“Employment Agreement”) was executed between the

Appellant and the Respondent to give effect to the employment of the
Appellant.
5. The Employment Agreement contained a Non-Solicitation and Non
-Compete Clause. The Non-Solicitation and Non-Compete Clause is as
follows:
“D. Non-solicitation and Non-Compete
2.16 The Employee shall not, directly or indirectly, either as an
individual on his/her own account or in any capacity or function,
during the employment period and for a period of 3 (three) years
following the cessation of employment engage into the following:
i. Solicit or attempt to solicit any of the business associates to
entice such business associates in any manner or offer/provide
substantially the same or competing services as provided by
the Company and its affiliates to such business associates; or
ii. Directly or indirectly solicit or associate or advise or undertake
employment or otherwise deal with any business associate
where the Employee first contacted, or was contacted by, or
introduced to the business associate in any manner in
connection with any business/professional assignments of
Company and its affiliates; or
iii. Directly or indirectly solicit, associate, advise or otherwise deal
with any of the existing Employees of the Company and its
affiliates or any person who was employed by the Company and
its affiliates within two years prior to such action.”
6. The Respondent was engaged by the DIC pursuant to Letters of
Intent dated 01.12.2021, 15.06.2023 and 27.11.2024, which required
specialized software professionals, specifically full stack developers, in
connection with a high-priority government initiative titled POSHAN
Tracker (“Project”). This project is aimed at enhancing nutritional
outcomes for children across the country and holds significant public
importance. The said engagement remains valid up to 30.06.2026. The
relationship between the Respondent and the DIC is that of a ‘Business
Associate’.
7. The Respondent had assigned the Appellant to work on the Project
as a full stack developer, with effect from January 2023. The Appellant,
who was assigned by the Respondent to the Project from January 2023,
underwent extensive specialized training, reflecting a considerable
investment made by the Respondent. Owing to his enhanced expertise,
the Appellant was elevated to a leadership role, wherein he was
entrusted with oversight of key project modules and active engagement
with stakeholders.
8. The Appellant resigned from his job in the Respondent company
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on 06.01.2025 and thereafter, served a notice period of three (3)

months and was under the employment of the Respondent until
07.04.2025. While serving the notice period with the Respondent, the
Appellant was appraised of a job opportunity with the DIC as their
General Manager. The Appellant was offered a job with the DIC on
27.03.2025 and accepted the job offer with effect from 08.04.2025,
after serving the notice period with the Respondent.
9. Aggrieved by the Appellant's decision to join DIC, which was also
the Business Associate of the Respondent, the Respondent filed the
Suit for permanent injunction and damages against the Appellant
before the learned Trial Court.
10. The learned Trial Court vide order dated 23.05.2025 granted an
ex parte ad interim injunction against the Appellant restraining the
Appellant from working with or for the clients and Business Affiliates of
the Respondent company until further orders. The Appellant was further
injuncted and restrained from disclosing confidential data belonging to
the Respondent, which had been acquired by the Appellant during the
course of his employment with the Respondent.
11. Aggrieved by the decision of the learned Trial Court to grant an
ex parte ad interim injunction until further orders, the Appellant filed
an Appeal before this Court being FAO No. 156/2025 against the order
dated 23.05.2025. Vide order dated 28.05.2025, the Appeal filed by
the Appellant was disposed of while impressing upon the learned Trial
Court to dispose the application for interim stay preferably within a
period of one week in accordance with law. Further, this Court held that
until the learned Trial Court passed the order in the application for
interim stay, the injunction granted against the Appellant vide order
dated 23.05.2025 shall not apply.
12. Vide the Impugned Order, the learned Trial Court allowed the
Application filed by the Respondent under Order XXXIX Rule 1 & 2 of
CPC and restrained the Appellant from working with DIC and NeGD. The
learned Trial Court held that there was a prima facie case in favour of
the Respondent, the balance of convenience also lies in favour of the
Respondent and if the Appellant was to share any proprietary
information, intellectual property, insider knowledge, source code, as
the case maybe, the Respondent and its employees would suffer
irreparable harm.
13. Being aggrieved by the Impugned Order, the Appellant has filed
the present Appeal.
SUBMISSIONS ON BEHALF OF THE APPELLANT:
14. Mr. Asav Ranjan, the learned counsel appearing for the Appellant
submitted that the learned Trial Court has erroneously interpreted the
provisions of Section 27 of the Indian Contract Act, 1872 (‘ICA’) by
applying the principle of reasonableness and permitting partial
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restraint, despite the fact that the Employment Agreement stood

terminated on 07.04.2025. Further, the Intellectual Property referred to
in the Impugned Order belongs to DIC and not the Respondent.
15. The learned counsel for the Appellant submitted that Section 27
of the ICA does not recognize the distinction drawn in English Law
between partial and absolute restraint. Any agreement that falls within
the scope of Section 27 is rendered void, unless it is saved by
Exception 1 to Section 27 of the ICA. This legislative intent is further
reinforced by the fact that, notwithstanding the recommendations
made by the Law Commission in its Thirteenth Report, no additional
exceptions have been incorporated into Section 27 of the ICA.
16. The Appellant relied upon Superintendence Co. of India v.
Krishan Murgai, (1981) 2 SCC 246, to submit that Section 27 of the
ICA does not draw distinction between partial and complete restraint,
any agreement with the object of restraining trade is void. Unless the
agreement falls within Exception 1 to Section 27 of the ICA the
agreement is void irrespective of the nature of the restraint provided
thereunder.
17. The learned counsel for the Appellant submitted that the Clause
2.16 of the Employment Agreement, when read along with the
definition of ‘Business Associate’, is worded as a blanket prohibition on
the Appellant from working with existing or potential customers.
However, such a restriction cannot be sustained or confined even to a
single customer, client, vendor, or affiliate of the Respondent, since any
form of restraint, whether partial or absolute, becomes legally
inapplicable once the Appellant was relieved from service upon
completion of the stipulated ninety-day notice period.
18. The Appellant relied upon the judgment in Madhup Chunder v.
Rajcoomar Doss, (1874) 14 Beng LR 76, to submit that Section 27 of
the ICA deliberately omits the use of the word ‘absolutely,’ which is
expressly mentioned in Section 28(a) of the ICA dealing with
agreements in restraint of legal proceedings. This omission reflects the
specific legislative intent to prohibit not only absolute restraints, but
also any form of partial restraint on trade or profession.
19. The learned counsel for the Appellant submitted that an
agreement in restraint of trade or profession, whereby a person binds
himself, is valid only during the subsistence of the Employment
Agreement. However, the present case is governed by the judgment of
the Supreme Court in Superintendence Co. (supra), wherein it was
categorically held that under Section 27 of the ICA, a service covenant
that extends beyond the termination of employment is void.
20. The learned counsel for the Appellant has further relied upon the
judgment in Niranjan Shankar Golikari v. Century Spg. and Mfg. Co.
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Ltd., 1967 SCC OnLine SC 72 to submit that Section 27 of the ICA

restrains a service covenant to be extended beyond the termination of
service and a clause intended to restrain trade is void.
21. The learned counsel for the Appellant has relied upon the
judgments in the cases of Interlink Services (P) Ltd. v. S.P. Bangera,
1997 SCC OnLine Del 23, Ambiance India (P) Ltd. v. Naveen Jain, 2005
SCC OnLine Del 367, Wipro Ltd. v. Beckman Coulter International S.A.,
2006 SCC OnLine Del 743, to submit that this Court has held that once
the agreement between the parties ends, whether by termination or
expiry, any restriction placed on a person's ability to work or carry on
their profession after that point is not enforceable under Section 27 of
the ICA. Further, the learned counsel for the Appellant has relied upon
the judgment in R. Babu v. TTK LIG Ltd., (2005) 124 Comp Cas 109, to
submit that no injunction can be granted against an employee after the
termination of his employment, restraining him from carrying on a
competitive trade.
22. Since the Employment Agreement between the Appellant and
the Respondent stood terminated on 07.04.2025, and the Appellant
joined the DIC on 08.04.2025, the Appellant is well within his legal
rights to engage in any competitive trade. This right extends to even
providing similar services to a former client or competitor of the
Respondent, including the DIC.
23. The learned counsel for the Appellant relied upon the judgment
in Manipal Business Solutions (P) Ltd. v. Aurigain Consulants (P) Ltd.,
2022 SCC OnLine Del 2480, to submit that a clause which lays down a
restriction against any association with a business associate of the
previous employer post employment is void.
24. The learned counsel for the Appellant submitted that neither the
test of reasonableness nor the principle that a restraint is only partial is
applicable to a contractual clause that falls within the ambit of Section
27 of the ICA. The Appellant relied upon Percept D'Mark (India) (P) Ltd.
v. Zaheer Khan, (2006) 4 SCC 227 and Navigators Logistics Ltd. v.
Kashif Qureshi, 2018 SCC OnLine Del 11321 to support the submission
that the applicability of neither the test of reasonableness nor the
notion that the restraint is merely partial arises in the context of a
clause falling under Section 27 of the ICA, unless the clause clearly falls
within Exception 1 to Section 27 of the ICA.
25. The learned counsel for the Appellant relied upon the judgment
in Vijaya Bank v. Prashant B Narnaware, 2025 SCC OnLine SC 1107, to
submit that the onus of establishing that a restrictive covenant in the
Employment Agreement does not amount to a restraint on lawful
employment nor it is against public policy lies with the employer and
not the employee.
26. The learned counsel for the Appellant submitted that not even a
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single judgment relied upon by the Respondent pertains to the grant or

upholding of an injunction after the termination, cessation, or expiry of
the Employment Agreement. Further, the learned counsel for the
Appellant relied upon Indus Power Tech Inc. v. Echjay Industries (P)
Ltd., 2024 SCC OnLine Bom 3349, to submit that though a non-
compete clause can operate validly during the term of the Employment
Agreement, it would not be valid post-termination of the Employment
Agreement as it would result in restraint of trade prohibited under
Section 27 of the ICA.
27. The learned counsel for the Appellant submitted that no
confidential information, trade secret, or proprietary right was created
during the course of the Appellant's employment with the Respondent.
As per Clause 1 of the Letter of Intent dated 15.06.2023, the scope of
work between the DIC and the Respondent Company was limited to the
supply of manpower or technical personnel. The Respondent is engaged
in the business of providing software professionals on a contractual
basis to clients requiring such services. Accordingly, the Respondent
neither owns nor has developed any source code, intellectual property,
or proprietary material in respect of the Project.
28. The Appellant was assigned to the Project in January 2023. His
work involved using publicly available data from the Government's App
for the Project and updating it on the Project website through basic
coding and graphical representation. The Respondent has portrayed this
routine task as an advanced technical work. In truth, the work was
mechanical and did not involve any confidential or proprietary
development.
29. The learned counsel for the Appellant submitted that the
confidential information, intellectual property, source code, or
proprietary material in question is owned exclusively by the DIC and
not by the Respondent. This is evident in the Letters of Intent issued by
the DIC. The Respondent has intentionally not made the DIC a party to
the suit, likely to avoid objections on the ground of ownership of the
Intellectual Property related to the project. If the DIC asserts its
Intellectual Property Rights, the entire claim against the Appellant
would stand vitiated and will fail.
30. The learned counsel for the Appellant submitted that irreparable
harm will be caused to the Appellant, and the balance of convenience
lies in favour of the Appellant. Vide the Impugned Order, the Appellant
has been rendered without a source of livelihood, and any restraint
from trade may lead to his inability to meet essential financial
obligations, including monthly bills and EMIs. Further, the pendency of
the suit or enforcement of the Impugned Order would unfairly damage
the Appellant's professional record, jeopardising future employment
prospects and causing lasting harm to his career and reputation.
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31. Hence, the learned Trial Court has erroneously allowed the
Respondent's Application for interim protection against the Appellant
and the Impugned Order deserves to be set aside.
SUBMISSIONS ON BEHALF OF THE RESPONDENT:
32. Mr. Divyankant Lahoti, the learned counsel appearing for the
Respondent submitted that the Appellant was initially hired as a PHP
engineer with a limited technical role. Over time, with the Respondent's
structured training and guidance, he progressed into a data engineering
specialist. The Respondent continued raising invoices on DIC for the
Appellant's services until 31.03.2025. However, on 08.04.2025, the
Appellant joined DIC as Deputy General Manager in Full Stack
Development for the Project. Appellant's direct employment by DIC for
the Project, concurrent with active and continuous contractual
engagements between the Respondent and DIC which is valid up to
30.06.2026 is in breach of Clause 2.16 of the Employment Agreement.
33. The learned counsel for the Respondent submitted that during
his employment, the Appellant acquired specialized knowledge and
technical skills relating to the Project developed by the Respondent,
involving Backend and Frontend Development, API Integration, and
Data Management. His subsequent role relies on confidential
information, proprietary techniques, and internal knowhow gained
during this tenure. Such use is expressly prohibited under the
Confidentiality and Non-Disclosure Clauses 2.6, 2.7, 2.8, 2.9, 2.10 and
2.11 of the Employment Agreement and the Breach of Trust Clause 4
read with Clause 2.2 of the Employment Agreement. The Appellant's
actions, thus, amount to a direct violation of these terms of the
Employment Agreement. The relevant Clauses are reproduced
hereunder:
“2.2 Company incurs substantial expenditure in Research and
Development for value creation, improvisation, innovation, updation
and development of its product(s). Employee acknowledges that it is
imperative for the Company to safeguard such resultant Intellectual
Property Rights interests. Employee agrees and acknowledges that if
he/she works on any of Company's and its affiliate's product(s),
he/she would be involved in such Research and Development
processes and will have firsthand knowledge of such Research and
Development process outcomes. Accordingly, any such Employee
who has been a product team member undertakes to not work or
associate with any third person or organization regarding any similar
or competing product for a period of 3(three) years from the date of
cessation of his/her employment”
xxxxxx
B. Confidentiality and Non-Disclosure
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2.6. Employee understands and acknowledges that his/her

employment with the Company creates a relationship of confidence
and trust with respect to Confidential Information disclosed by the
Company. Employee hereby agrees and acknowledges that he/she
will be in possession and may continue to be in possession of
Confidential Information of the Company, which is the exclusive
property of the Company.
2.7. During the employment and at all times thereafter, Employee
hereby undertakes that he will take all necessary precaution to
safeguard Confidential Information of the Company.
2.8. Employee undertakes not to share, copy, transmit, publish
and/or disclose to any person or organization such Confidential
Information, during the course of employment andjor after the
cessation of employment with Company. Employee further
undertakes to not facilitate sharing, transmission, copying,
publishing and disclosure of such Confidential Information during the
course of employment and/or the cessation of employment with the
Company. However, these restrictions may not be applicable in
ordinary course of business of Company when such copying.
transmitting, andjor publishing/disclosing Confidential Information is
carried out solely for official purposes through Company's official and
assigned channels of communication.
2.9. Employee agrees and undertakes to not cite, publish, disclose
or make any direct references of Confidential Information of
Company on any social media platforms and/or on any online
biography/curriculum vitae, which will affect his/her obligations to
comply with any of the obligations stated hereinabove regarding
such Confidential Information.
xxxxxx
2.11. During the employment and at all times thereafter,
Employee hereby undertakes to not benefit himself or any person,
organization, or competitor-directly or indirectly-on account of the
Confidential Information of the Company.
xxxxxxx
“4. Breach of Trust
4.1. Employee understands and acknowledges that his/her
employment with the Company is based on the relationship of
confidence and mutual trust. Employee acknowledges and agrees
that any breach or threatened breach of obligations relating to
Confidential Information, Intellectual Property Rights, Non-Compete
and Non-Solicitation, and Exclusive Engagement will cause Company
irreparable harm for which monetary damages are inadequate
compensation. The Company shall therefore be entitled to initiate
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criminal proceedings to enforce aforesaid covenants to prevent any

actual or threatened breach of such covenants in the appropriate
court of law to further the charge of criminal breach of trust for such
misappropriation.”
34. The learned counsel for the Respondent sought reliance on the
judgment in Leeds Rugby Ltd. v. Harris, [2005] EWHC 1591 (QB), to
submit that post-employment restraints in employment agreements are
enforceable if they are reasonable and meant to protect the employer's
business interests.
35. The learned counsel for the Respondent relied upon the
judgment in Stenhouse Australia Ltd. v. Marshall William Davidson
Phillips, [1974] A.C. 391, to submit that whether a particular
contractual provision operates in restraint of trade is to be determined
not by the form the stipulation wears, but by its effect in practice.
36. The learned counsel for the Respondent submitted that an
employer seeking to enforce a post-employment restraint must prove
that the covenant is reasonable and protects a legitimate proprietary
interest. Such restraints may be upheld if they prevent the misuse of
trade secrets or confidential information acquired during employment.
Depending on the role, an employee may also be lawfully restricted
from joining a competitor or setting up a competing business that could
harm the employer's customer base. In some cases, even soliciting the
employer's clients may be validly prohibited.
37. The learned counsel for the Respondent has relied upon the
judgment in Attwood v. Lamont., [1920] 3 K.B. 571, to submit that the
burden lies on the employer to demonstrate that the covenant imposed
on the employee is reasonable between the parties and is aimed at
protecting a legitimate proprietary interest of the employer for which
such restraint is justifiably required. The Respondent has shown the
restraint to be reasonable and hence, the interim stay granted by the
learned Trial Court was valid.
38. The learned counsel for the Respondent has sought reliance on
the judgment in Haynes v. Doman., [1899] 2 Ch. 13, Caribonum Co. v.
Le Couch, (1913) 109 LT 385, Clark v. Electronic Applications
(Commercial) Ltd., [1963] R.P.C. 234, Brunning Group v. Bentley,
[1966] C.L.Y. 4489; Littlewoods Organisation Ltd. v. Harris, [1977] 1
WLR 1472, Voaden v. Voaden Unreported February 21, 1997, Lindsay J.
(Unreported); Polymas Pharmaceutical Plc v. Stephen Alexander
Charles, [1999] F.S.R. 711, to submit that an employer may lawfully
include a covenant that prevents an employee, after the termination of
employment, from taking up a role where they are likely to use
confidential information or trade secrets gained during the course of
their employment.
39. The learned counsel for the Respondent has further relied upon
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S.W. Strange Ltd. v. Mann, [1965] 1 WLR 629, Commercial Plastics v.

Vincent, [1964] 3 All ER 546, Office Angels Ltd. v. Rainer-Thomas and
O'Connor, (1991) 1 RLR 214, Brake Bros Ltd. v. Ungless, [2004] EWHC
(QB) 2799, Baines v. Geary, [L.R.] 35 Ch. 154, Ropeways v. Hoyle,
(1919) 88 L.J. Ch. 446, Fitch v. Dewes, [1921] 2 A.C. 158, Marion
White Ltd. v. Francis, [1972] 1 WLR 1423, T. Lucas & Co. Ltd. v.
Mitchell, [1974] Ch. 129, Spafax (1965) Ltd. v. Dommett, (1972) 116
S.J. 711, S.B.J. Stephenson Ltd. v. Mandy, (2000) 1 RLR 233, to
submit that an employer may validly restrict a former employee from
joining a competitor or starting a similar business if it risks harming the
employer's client relationships. Such covenants may also lawfully
prevent the Appellant from soliciting the employer's customers post-
employment.
40. The learned counsel for the Respondent relied upon the
judgment in Niranjan Shankar (supra) to submit that a negative
covenant that prevents an employee from engaging in similar line of
work or being employed by another competitor in the same line is not
considered a restraint of trade unless it is excessively harsh,
unreasonable, one-sided, or unconscionable. The Clause 2.16 of the
Employment Agreement is reasonable so as to protect the rights of the
Respondent and is neither excessively harsh, unreasonable, one-sided
nor unconscionable for the Appellant. Further the Court can grant a
limited injunction to protect the employer's interests if the covenant is
valid, and its enforcement does not compel the employee to idleness or
return to the Respondent. The Appellant cannot make the submission
for idleness as he had received another job offer from Accenture. The
Appellant has breached the Employment Agreement solely for higher
pay and cannot oppose an injunction enforcing a valid negative
covenant to protect the Respondent's interests.
41. The learned counsel for the Respondent has further relied upon
the judgment in the case of Desiccant Rotors International (P) Ltd. v.
Bappaditya Sarkar, 2009 SCC OnLine Del 1926, Embee Software Private
Limited v. Samir Kumar Shaw, 2012 SCC OnLine Cal 3094, Hi-Tech
Systems & Services Ltd. v. Suprabhat Ray, 2015 SCC OnLine Cal 1192,
to submit that reasonable negative covenants to protect the Intellectual
Property Rights of the Respondent are valid and enforceable against the
Appellant.
42. The learned counsel for the Respondent submitted that the bar
under Section 27 of the ICA is not absolute and may be rebutted if the
restraint is shown to be reasonable and not excessive for both parties.
Further, reliance was placed upon the judgment Gilford Motor Co. v.
Horne, [1933] Ch. 935, to submit that a covenant against solicitation is
reasonably necessary to protect the Respondent when the Appellant's
new role involves direct contact with or access to the Respondent's
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Business Associate.
43. The learned counsel for the Respondent has submitted that the
negative covenant post-termination of Employment Agreement is
reasonable as it restricts the Appellant from joining only DIC and NeGD
for three years post termination, allowing him to work elsewhere freely.
Despite this, the Appellant accepted an offer from DIC for the Project
during the course of his employment with the Respondent, violating the
terms of his Employment Agreement. The learned counsel for the
Respondent has relied upon the judgment in Niranjan Shankar (supra)
and Vijaya Bank (supra) to submit that negative covenants with respect
to reasonable restriction on post cessation employment is legally valid.
44. The learned counsel for the Respondent has submitted that the
Appellant's public declaration of joining DIC, made an open breach of
the Employment Agreement, sets a harmful precedent that may
influence other employees to disregard their contractual obligations.
This act threatens the stability of the Respondent's workforce, disrupts
client relationships, and damages operational continuity. As a result,
the Respondent faces irreparable harm including loss of reputation,
project delays, increased costs for hiring, and reduced efficiency.
45. The Appellant's claim of not having received any proprietary
information during his employment with the Respondent is unfounded,
as his involvement in the Project required access to confidential
processes and technical frameworks crucial to the Respondent's
operations. The Appellant's reliance on DIC's Intellectual Property
Clause envisaged in Clause 7(ii) of the Letter of Intent dated
15.06.2023, does not undermine the Respondent's right to protect its
independently developed proprietary methods and internal know-how.
The Clause 7(ii) of the Letter of Intent dated 15.06.2023 is as follows:
“7. Association. IPR & Deliverables:
ii. The Intellectual Property Rights on the developed software code
and related documentation will be with DIC.”
46. The learned counsel for the Respondent has submitted that the
Appellant suppressed material facts and documents and submitted a
false certificate in respect of providing complete Trial Court record in
the present Appeal. Suppression of material facts and documents by
the Appellant disentitles him from obtaining equitable relief. The
learned counsel for the Respondent relied upon Seemax Construction
(P) Ltd. v. State Bank of India, 1991 SCC OnLine Del 668, to further
submit that suppression of material facts by the Appellant is a
sufficient ground to decline the discretionary relief of injunction.
47. The learned counsel for the Respondent submitted that the
Respondent has only sought a narrow restriction against the Appellant
and failure to protect the Respondent would lead to an irreparable harm
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to the business interests of the Respondent. Hence, the Impugned

Order dated 03.06.2025 correctly injuncts the Appellant and the Appeal
deserves to be dismissed.
ANALYSIS AND FINDINGS:
48. The Appellant has challenged the Impugned Order whereby the
Appellant has been restrained from working with DIC and NeGD until
the final disposal of the Suit by the learned Trial Court. The Impugned
Order has observed that the restraint sought by the Respondent was
limited to the existing clients of the Respondent with whom the
Appellant had worked during the course of his employment with the
Respondent. Accordingly, the learned Trial Court found that such a
limited restraint cannot be considered to be a ‘blanket ban’ and/or a
complete restraint on the freedom of trade, commerce and profession.
Accordingly, the Appellant was restrained from working with DIC and
NeGD till the final disposal of the Suit.
49. The Respondent has relied upon clauses 2.2, 2.6, 2.7, 2.8, 2.9,
2.10, 2.11 and 2.16 to seek injunction against the Appellant from
committing a breach of non-solicitation and non-compete obligation
under the Employment Agreement between the Appellant and the
Respondent by working with DIC and NeGD after the termination of
employment of the Appellant with the Respondent.
50. The main issue that requires determination in this Appeal
pertains to the validity of the non-solicitation and non-compete clause
in the Employment Agreement under Section 27 of the ICA.
51. Section 27 of the ICA provides as under:
“27. Agreement in restraint of trade, 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.”
52. The Appellant has submitted that the learned Trial Court has
erroneously construed the law pertaining to Section 27 of the ICA by
applying the principle of reasonableness and partial restrain despite
termination of the Employment Agreement on 07.04.2025. It is further
contended by the Appellant that the Impugned Order wrongly grants
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partial restrain on the Appellant by restricting in from working with DIC

and NeGD on an apprehension of disclosure of alleged proprietary
information, intellectual property, insider knowledge, source code by
the Appellant to DIC or NeGD.
53. The Appellant has submitted that the Respondent never had
ownership power the developed intellectual property, confidential
information or the source code as the same already belongs to DIC. The
Appellant has relied upon Letter of Intent dated 15.06.2023 and Letter
of Confirmation for Empanelment of Service Providers dated 01.12.2021
issued by DIC to the Respondent, which provide that “The Intellectual
Property Rights on the developed software code and related
documentation will be with DIC.”
54. The Appellant has further submitted that the Respondent has
intentionally not joined DIC, the present employer of the Appellant, in
order to avoid any objection as to ownership of Intellectual Property,
data, source codes and proprietary information by DIC as otherwise the
entire Suit against the Appellant shall fail.
55. The Appellant has relied upon the scope of work between DIC
and the Respondent, which only provided for supply of manpower.
Since the Respondent is in the business of providing manpower to the
companies having requirement of software developer, the Appellant has
submitted that there was no confidential information, source code,
intellectual property right that belonged to the Respondent.
56. The Appellant has submitted that the Appellant started working
on POSHAN TRACKER PROJECT since January, 2023. The Appellant
while in employment with the Respondent, extracted information from
the Government of India's mobile Application called Poshan and
updated the same on the Poshan Tracker website of DIC in various
forms with graphics. It was submitted by the Appellant that the
Respondent has given this mechanical work of representing and
augmenting data by way of Coding on an existing website by using
computer jargon.
57. The Appellant has submitted that an agreement in restraint of
trade/profession is valid only during the term of the agreement and any
restriction extended beyond the termination of the service is void under
Section 27 of the ICA.
58. Both the Appellant and the Respondent have relied upon the
decision of the Supreme Court in Niranjan Shankar Golikari (supra),
which held that:
“17. The result of the above discussion is that considerations
against restrictive covenants are different in cases where the
restriction is to apply during the period after the termination of the
contract than those in cases where it is to operate during the period
of the contract. Negative covenants operative during the period of
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the contract of employment when the employee is bound to serve his

employer exclusively are generally not regarded as restraint of trade
and therefore do not fall under Section 27 of the Contract Act. A
negative covenant that the employee would not engage himself in a
trade or business or would not get himself employed by any other
master for whom he would perform similar or substantially similar
duties is not therefore a restraint of trade unless the contract as
aforesaid is unconscionable or excessively harsh or unreasonable or
one-sided as in the case of W.H. Milsted & Son Ltd. Both the trial
court and the High Court have found, and in our view, rightly, that
the negative covenant in the present case restricted as it is to the
period of employment and to work similar or substantially similar to
the one carried on by the appellant when he was in the employ of
the respondent Company was reasonable and necessary for the
protection of the company's interests and not such as the court
would refuse to enforce. There is therefore no validity in the
contention that the negative covenant contained in clause 17
amounted to a restraint of trade and therefore against public policy.
18. The next question is whether the injunction in the terms in
which it is framed should have been granted. There is no doubt that
the courts have a wide discretion to enforce by injunction a negative
covenant. Both the courts below have concurrently found that the
apprehension of the respondent Company that information regarding
the special processes and the special machinery imparted to and
acquired by the appellant during the period of training and thereafter
might be divulged was justified; that the information and knowledge
disclosed to him during this period was different from the general
knowledge and experience that he might have gained while in the
service of the respondent Company and that it was against his
disclosing the former to the rival company which required protection.
It was argued however that the terms of clause 17 were too wide
and that the court cannot sever the good from the bad and issue an
injunction to the extent that was good. But the rule against
severance applies to cases where the covenant is bad in law and it is
in such cases that the court is precluded from severing the good
from the bad. But there is nothing to prevent the court from granting
a limited injunction to the extent that is necessary to protect the
employer's interests where the negative stipulation is not void. There
is also nothing to show that if the negative covenant is enforced the
appellant would be driven to idleness or would be compelled to go
back to the respondent Company. It may be that if he is not
permitted to get himself employed in another similar employment he
might perhaps get a lesser remuneration than the one agreed to by
Rajasthan Rayon. But that is no consideration against enforcing the
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covenant. The evidence is clear that the appellant has torn the
agreement to pieces only because he was offered a higher
remuneration. Obviously he cannot be heard to say that no
injunction should be granted against him to enforce the negative
covenant which is not opposed to public policy. The injunction issued
against him is restricted as to time, the nature of employment and
as to area and cannot therefore be said to be too wide or
unreasonable or unnecessary for the protection of the interests of the
respondent Company.”
59. The Appellant has submitted that the Supreme Court held that
the negative covenant restricted to the period of employment and to
work similar or substantially similar to the one carried on by the
employee when he was in the employment, was found to be reasonable
and enforceable. However, the Respondent has relied upon the
observation that the Court can grant a limited injunction to the extent
that is necessary to protect the employer's interest, where the negative
stipulation is not void. When the enforcement of negative covenant
would not drive the employee to idleness or would compel to go back to
the previous employer, an injunction can be granted to enforce the
negative covenant, which is not opposed to the public policy. The
Respondent has contended that the injunction that is restricted as to
time, the nature of employment and as to the area cannot be said to be
too wide or unreasonable or unnecessary for the protection of the
interest of the Respondent.
60. The Respondent has relied upon the decision of the Coordinate
Bench of this Court in Desiccant Rotors (supra), which held that the
question of restraint on trade does not have two ways about the fact
that the approach towards the negative covenant subsisting during the
course of employment is completely different from the approach, which
would be taken post-employment duration. If the negative covenant is
not in the form of restraint on trade, but only protects the confidential
and proprietary information to which the employee was privy, the same
can be enforced.
61. The Respondent has also relied upon the decision of Embee
Software (supra), which holds that the non-solicitation clause does not
amount to restraint of trade, business or profession and would not be
hit by Section 27 of the ICA as being void.
62. The decision of Hi-Tech Systems (supra) relied upon by the
Respondent holds that the injunction preventing the employee from
disclosing confidential data and soliciting customer is not in restraint of
trade.
63. The Appellant has relied upon the decision of Superintendence
Company (supra) to submit that Section 27 of ICA does away with the
distinction observed in English cases with respect to partial and total
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restraint. Accordingly, the English cases cited by the Respondent are

not helpful to the Respondent.
64. Under Indian Law, all contracts falling within the terms of
Section 27 of the ICA are void unless they fall within the specific
exception under Section 27 of the ICA. Accordingly, the Appellant has
submitted that clause 2.16 read with a definition of ‘Business
Associates’ in the Employment Agreement between the Appellant and
the Respondent is very broad and imposes a blanket ban on the
Appellant to not work for any present or potential customer of the
Respondent. Hence, the restriction sought to be enforced by the
Respondent is clearly in restraint of trade and is void under Section 27
of the ICA.
65. The Appellant has also relied upon the decision of the Supreme
Court in Percept D' Mark (supra) to submit that a restrictive covenant
extending beyond the terms of the contract is void and not enforceable.
Further, the decision of Coordinate Bench of this Court in Wipro Ltd.
(supra) holds that the negative covenants between employer and
employee pertaining to the period of post-termination and restricting
and employees' right to seek employment and/or to do business in the
same field as the employer would be in restraint of trade and,
therefore, a stipulation to this effect in the contract would be void.
66. An employee cannot be confronted with the situation where 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 standard
form contract or not be employed at all.
67. Further, the reasonableness and whether the restraint is partial
or complete is not required to be considered at all when an issue arises
as to whether a particular term of contract is or is not in restraint of
trade, business or profession.
68. In view of the above, it is clear that any terms of the
employment contract that imposes a restriction on right of the
employee to get employed post-termination of the contract of
employment shall be void being contrary to Section 27 of the ICA.
69. In the present case, clause 2.16 of the Employment Agreement
restricts the Appellant from undertaking employment or otherwise deal
with any Business Associate where the Appellant first contracted or was
contracted by, or introduce to the Business Associate in any manner in
connection with any business/professional assignment of the
Respondent and/or its Affiliate. Admittedly, DIC and NeGD are covered
within the definition of Business Associate under the Employment
Agreement. Hence, even though, the Respondent has restricted the
injunction to the employment of the Appellant with DIC and NeGD only,
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the same shall be in restraint of trade and void.

70. It is settled law that the negative covenant post termination of
the employment can be granted only to protect the confidential and
proprietary information of the employer or to restrain the employee
from soliciting the clients of the employer. However, none of the cases
relied upon by the Respondent has held that the employee can be
restrained from undertaking any employment in order to enforce the
negative covenant.
71. This Court in case of American Express Bank Ltd. v. Ms. Priya
Malik, (2006) 3 LLJ 540 DEL has held that right of an employee to seek
and search for better employment are not to be curbed by an injunction
even on the ground that the employee has confidential data. In the
garb of confidentiality, the employer cannot be allowed to perpetuate
forced employment. Freedom of changing employment for improving
service conditions is a vital and important right of an employee, which
cannot be restricted or curtailed on the ground that the employee has
employer's data and confidential information. Such a restriction will be
hit by Section 27 of the ICA.
72. The Impugned Order has restricted the Appellant from working
with DIC and NeGD during the pendency of the Suit on an
apprehension that the Appellant may disclose the proprietary
information, intellectual property, insider knowledge, source code etc.
However, the scope of work between DIC and the Respondent was
limited to providing the supply of manpower and by the Respondent.
The contractual term between DIC and the Respondent provided that
the intellectual property right at the developed software code and
related documentation shall belong to DIC. Hence, 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. The balance
of convenience is in favour of the Appellant as the Appellant has
already joined DIC and if the Appellant is restrained from working with
DIC during the pendency of the Suit, it would cause irreparable loss to
the Appellant. In case, the Respondent is able to prove the breach of
the Employment Agreement, it can be compensated by way of
damages. In view of the same, the Impugned Order, which is contrary
to the settled position of law, cannot be sustained.
73. In view of the above, the present Appeal is allowed and the
Impugned Order is quashed and set aside. Pending application(s), if
any, shall stand disposed of. No orders as to costs.
———
§
2025 : DHC : 5015
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