The Indian Contract Act, 1872
27. Agreement in restraint of trade, void
Every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.
Exception 1 : Saving of agreement not to carry on business of which good will is sold – One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein, provided that such limits appear to the court reasonable, regard being had to the nature of the business.
Agreement in restraint of trade
The words “restrained from exercising a lawful profession, trade or business”, do not mean an absolute restriction, and are intended to apply to a partial restriction, a restriction limited to same particular place; Mahbub Chander v. Raj Coomar, (1874) XIV Bengal Law Reports 76.
1.Exceptions 2 and 3 rep. by Act 9 of 1932, sec. 73 and Sch. II.