It is definitely most heart gladdening to note that none other than the most prestigious High Courts in India that is the Delhi High Court itself in a most vital step aimed at curbing the blatant misuse of restrictive employment contracts has in a most learned, laudable, logical, landmark and latest judgment titled Varun Tyagi vs. Daffodil Software Private Limited in Case No.: FAO 167/2025 & CM APPL. 36613/2025 and cited in Neutral Citation No.: 2025:DHC:5015 that was pronounced as recently as on 25.06.2025 ruled most explicitly that employers cannot prevent former employees from taking up new jobs as they want, including with their own clients or associates. Undoubtedly, this most commendable, cogent, convincing, courageous and creditworthy judgment is bound to extremely benefit those who seek for better job prospects after quitting due to lack of satisfaction in the present job! It must be noted that the Single Judge Bench comprising of Hon’ble Mr Justice Tejas Karia in his rational judgment was most categorical in asserting most unequivocally that, “An employee cannot be confronted with the situation where he has to either work for the previous employer or remain idle.” Very rightly so!
It must be unfolded here that this leading case involved software engineer Varun Tyagi, who had worked on the government’s POSHAN Tracker project while employed by Daffodil Software. It must be noted that the project that is owned by the Digital India Corporation (DIC), is a key national initiative that is aimed at improving child nutrition. Varun Tyagi had joined DIC directly after completing his notice period in April 2025.
This culminated in Daffodil Software taking Varun to court and cited a clause in his contract that barred him from joining any “business associate” for three years after leaving. We must pay attention that the learned District Judge-06 (South), Saket Courts, South Delhi (“Trial Court”) in CS DJ 353/2025 (“Suit”) in its order dated 03.06.2025 (“Impugned Order”) agreed with Daffodil Software and restrained Varun from working with DIC, compelling him to seek relief in the Delhi High Court. While overturning the Saket District Court’s order, the Delhi High Court not only allowed Varun to take up his new role but also simultaneously made strong observations on employment rights.
It was made indubitably clear by the Delhi High Court that companies cannot use broad, catch-all clauses to prevent former employees from working elsewhere, especially when they were not hired to make proprietary technology. The Bench concluded that Daffodil had no grounds to prevent Varun from joining DIC, especially since he hadn’t created any proprietary software or confidential intellectual property. It was noted by the Bench that all rights to the POSHAN Tracker belonged to the government and not to the private contractor.
At the very outset, this brief, brilliant, bold and balanced judgment authored by the Single Judge Bench comprising of Hon’ble Mr Justice Tejas Karia of Delhi High Court sets the ball in motion by first and foremost putting forth in para 1 that, “The Appellant has filed the present Appeal under Section 104 read with Order XLIII Rule 1(R) of the Code of Civil Procedure, 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”).”
As we see, the Bench then discloses in para 2 that, “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.”
As it turned out, the Bench unravels in para 3 revealing that, “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.”
To put things in perspective, the Bench envisages in para 4 while elaborating on the factual background stating that, “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 01.01.2022 (“Employment Agreement”) was executed between the Appellant and the Respondent to give effect to the employment of the Appellant.”
Truth be told, the Bench points out in para 6 that, “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’.”
As an aside, the Bench mentions in para 7 that, “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.”
Do note, the Bench notes in para 8 that, “The Appellant resigned from his job in the Respondent company 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.”
Quite ostensibly, the Bench observes in para 9 that, “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.”
Do also note, the Bench then notes in para 10 that, “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.”
Do further note, the Bench further notes in para 11 that, “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.”
It is worth mentioning that the Bench observes in para 12 that, “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.”
As a corollary, the Bench points out in para 13 that, “Being aggrieved by the Impugned Order, the Appellant has filed the present Appeal.”
Be it noted, the Bench notes in para 63 that, “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 restraint. Accordingly, the English cases cited by the Respondent are not helpful to the Respondent.”
It is worth noting that the Bench notes in para 64 that, “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.”
It would be instructive to note that the Bench notes in para 65 that, “The Appellant has also relied upon the decision of the Supreme Court FAO 167/2025 Page 23 of 25 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.”
Most significantly, the Bench while upholding employees legal right to switch jobs encapsulates in para 66 what constitutes the cornerstone of this notable judgment postulating precisely that, “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.”
In addition, the Bench points out in para 67 that, “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.”
Resultantly and notably, the Bench notes in para 68 that, “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.”
Quite pertinently, the Bench points out in para 69 that, “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, the same shall be in restraint of trade and void.”
Needless to say, the Bench states in para 70 that, “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.”
Most forthrightly, the Bench while citing the relevant case law propounds in para 71 stating that, “This Court in case of American Express Bank Ltd. v. Ms. Priya Malik, (2006) III 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.”
Most rationally, the Bench expounds in para 72 holding and directing that, “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 FAO 167/2025 Page 25 of 25 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.”
Finally, the Bench then concludes by directing and holding in para 73 of this notable judgment that, “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.”
Sanjeev Sirohi
