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Indian Restrictions on Disclosing Confidential Information to New Employers

The Calcutta High Court recently upheld an injunction order against former employees of a law firm restraining them from divulging confidential information and trade secrets gathered during their employment. Further, the Court emphasized the need to reevaluate Indian Contract Act to prohibit individuals from trading former employer’s confidential information for personal gain.  

The Court further opined that sharing of such information and communication would not only be unethical but would also constitute a breach of the confidentiality clause in the service contract. HoweverSection 27 of the Indian Contract Act stipulates that an agreement restraining a person from carrying on a lawful profession, trade, or business same or similar in nature is void Therefore, the Court noted that there should be a balance between the right to freedom of employment and protection of trade secrets. 

This decision can potentially be leveraged by Indian employers restraining their employees from purposefully joining a competitor to gain person interest by sharing confidential information.  

Employers need to be given a better chance to protect their trade secrets without impinging on the employees’ rights to be gainfully employed. The high court ruling is a step in the right direction and makes a good recommendation to revisit the law on protection of confidential information,” noted Akil Hirani, Managing Partner, Majmudar & Partners.

Published on: May 4, 2022

Authors: Dilpreet Singh, Rohit Dhawan

Topics: Employment Law, India

Dilpreet Singh

Chief Advisor, India, HR Policy Association

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Rohit Dhawan

Resource Manager, HR Policy in India, HR Policy Association

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