Another exception to the rule of limiting trade restriction agreements is provided for in the Partnership Act of 1932. The law provides for three exceptions. These are: Any person in India is free to engage in any legal, commercial or professional activity. This freedom has been guaranteed to every citizen by the Indian Constitution. The right to trade and to work is as important as the right to life. Just as a person does not have the right to deprive himself of his life, nor can he deprive himself of the right to trade and profession. An agreement. which impede the commercial and professional freedom of a party shall not apply. Retained during employment and after employment This topic was first discussed by the Supreme Court of Niranjan Shankar Golikar vs Century Spg &Mfg Co. Ltd. a company manufacturing tyre thread has been offered cooperation by a foreign manufacturer on condition that the company keeps all the technical information of its employees secret. The defendant was appointed for a period of five years, provided that he was not served anywhere else during that period, even though he left office earlier.
Shelat J considered the agreement to be valid. The defendant was therefore prevented from serving elsewhere during the currency of the agreement. Some agreements are unenforceable in court because they are contrary to public policy and the public interest. Such agreements are not illegal, they can still be concluded, but they are unenforceable in court. In other words, if one of the parties to the agreement does not fulfil its obligations in such an agreement, the injured party cannot bring the case before a court of competent jurisdiction to assert its rights. Agreements to restrict trade, marriage and legal proceedings are examples of such agreements. In the common law, a common sense test is followed. An agreement to restrict trade is valid if: Some agreements are only detrimental to society.
They are against public order. Some of these agreements are agreements aimed at limiting material, commercial or judicial proceedings. These agreements are expressly set aside in the Indian Contracts Act, in sections 26, 27 and 28 respectively. The section is general and invalidates all agreements in pro-tanto limitations, except in the case mentioned in the exception, their question of whether an agreement under article 27 is void must be decided on the wording of this section. The wording of article 27 does not indicate that the principle referred to therein is not applicable where the restriction is limited to a single specific area, so that these questions of partial limitation take effect only if the facts fall within the exception in the section. A contract intended to restrict trade is prima facie null and void. Section 27 of the Indian Contract Act cancelled all pro-tanto trade restriction agreements, with the sole exception of the sale of exploitable property or goodwill. However, it is important to understand that these agreements are non-illegal. In other words, these agreements are not illegal, but they cannot be brought to justice if one of the parties does not fulfill its part of the agreement. Unlike customary law, partial agreements aimed at restricting trade or appropriately restricting under the Contracts Act are also not valid. In other words, any agreement that prevents a person from starting or continuing his profession against a paid counterparty is nullity.
Therefore, any agreement that prevents a person from acting as he wishes or where he wishes is considered an agreement with another party in which the other party benefits from the cessation of his trade or profession as an agreement to restrict trade. With the exception of two exceptions that we will discuss below, all trade restriction agreements are null and void….