Bengaluru Court Rules Confidentiality Clauses Cannot Restrict Employees from Joining Rivals

A Bengaluru court has ruled that confidentiality agreements cannot be used to prevent former employees from pursuing lawful employment with competing businesses. The decision highlights the distinction between protecting an employer’s confidential information and imposing restrictions on an individual’s professional mobility.

The case involved EOX Vantage, which brought legal proceedings against its former employee, Shruthi BS, alleging that she had disclosed company data, solicited employees and diverted clients. The company sought a permanent injunction and claimed losses exceeding ₹20 lakh. It also referred to a criminal complaint in support of its allegations.

The court recognised that employers have a legitimate interest in protecting trade secrets, proprietary information, pricing structures and confidential customer data. However, it emphasised that contractual provisions cannot be extended to prevent former employees from pursuing a lawful profession, trade or business. Such restraints are generally void under Section 27 of the Indian Contract Act, subject to applicable legal principles and exceptions.

In assessing the evidence, the judge found shortcomings in the company’s case. WhatsApp conversations and emails were not adequately supported by witness testimony, the forensic investigators were not identified, and the electronic records did not establish the alleged data theft or employee poaching.

The court also considered the circumstances surrounding the employee’s departure. Shruthi had resigned on medical grounds in April 2022 and received a relieving letter following scrutiny by the company. The court noted that the evidence did not establish that she had subsequently joined a competing business.

As reported by Bar and Bench, the judgment also highlighted inconsistencies in the company’s conduct and found that the allegations and claimed damages had not been sufficiently established. The court dismissed the suit with costs.

For HR leaders, the ruling underscores the importance of distinguishing confidentiality obligations from restrictions on future employment. Employers can take appropriate measures to protect genuinely sensitive business information, but contractual provisions should not be treated as a blanket prohibition on employees joining competitors or using their general professional skills and experience.

The decision also highlights the importance of evidence when investigating suspected misconduct. Employers pursuing legal action over alleged data theft, client solicitation or employee poaching should ensure that electronic records are properly authenticated and supported by credible evidence.

The ruling serves as a reminder that effective confidentiality policies must protect legitimate business interests while respecting employees’ legal rights and freedom to pursue their careers.