In the recent case of Varun Tyagi v Daffodil Software Private Limited, Delhi High Court upheld the enforceability of negative covenants in employment contracts only to the extent of protecting the employer’s confidential and proprietary information and restraining the soliciting of clients. The court overruled the order of the trial court preventing Tyagi from taking up employment with Digital India Corporation (DIC) after his employment ceased at Daffodil Software Private Limited.
Tyagi was a software engineer employed by Daffodil. Their employment contract imposed three-year non-solicitation and non-compete clauses to take effect after termination. The contract also stipulated confidentiality and non-disclosure, restraining the employee from sharing and disclosing confidential information after employment.
Tyagi resigned from Daffodil. While serving the three-month notice period set out in his employment contract, he learned of the opportunity at DIC. Daffodil had business dealings with DIC, both as a client and as a business associate. DIC had engaged Daffodil to provide specialised software professionals for a high-priority government project and Tyagi had worked on it.
Daffodil sought to enforce the non-compete provisions, arguing that Tyagi had acquired specialised knowledge and skills related to the project. It further alleged that Tyagi’s engagement with DIC was based on confidential information and proprietary techniques obtained while at Daffodil, thereby...
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