For most of these transactions, it has been shown that the promoters of the equity company would be subject to appropriate restrictions in the form of non-compete clauses in the acquisition of the shares in the company in which the investments are made. In the case of shareholder agreements or where the PE/VC investor invests to acquire a majority stake in the equity firm, the structure of the transaction generally involves the implementation of a separate employment agreement with the developer of the equity company`s project, which inevitably has a separate non-competition clause. In agreements that contain a non-competition clause, one of the important factors to consider when developing the non-competition clause is the validity period of the clause or the time limit for which the restriction imposed by the non-competition clause applies. In general, the period applies for the duration of the contract and also for a fixed period after the expiry of the agreement, which varies from case to case. A non-compete clause (NCC) is a restrictive pact that often appears in combined agreements such as mergers and acquisitions (M-A) and joint venture agreements, which prohibits one party from competing with the other on the terms set out in the agreement. In other words, it prevents a party from making a similar trade or transaction at any given time in a regulated geographic area. Although such an alliance is considered an essential safeguard of the interests of the parties, it is generally considered to be limited to the individual`s liberty and right to trade, as enshrined in the Constitution, and is considered undistinghy under Section 27 of the Indian Contract Act of 1872. In another case in the pharmaceutical sector (Mylan Inc and Strides Acrolab Limited), the parties, as a result of the ICC`s statements, changed the scope of the non-competition ban by covering only products manufactured, sold or developed by the target company and its subsidiary. Sellers were able to continue to explore and explore new APIs or molecules that did not exist at the time. In addition, the parties reduced the duration of the non-competition obligation from six to four years. A private agreement between two or more members of a limited company would apply.
We can say that non-competitive clauses can be used as a weapon that prevents one or both parties to the agreement from competing with the other party, and such a restriction is valid and cannot be treated as a restrictive pact, because the only reason for including that clause in the agreements is to protect the interests of the parties. The application of this clause is not limited to employment contracts, but also extends to various other agreements, but the same would depend on a case-by-case basis and vary from case to case. This view of us is supported by a few judicial statements. B, for example, the Indian Supreme Court in Niranjan Shankar Golikari/ Century Spinning and Mfg. Co.[1] have decided that the non-compete clause is effective during the period of employment during which the worker is supposed to work exclusively for his employer.