ASSISTANT PROFESSOR FACULTY OF LAW, AMU, ALIGARH RESTRAINED OF TRADE (Sec.27) • Section 27:
• Agreements in Restraint of trade, VOID.
• Every agreement by which any one is restrained from exercising a Lawful Profession, Trade or Business of any kind, is to that extent VOID. RATIONAL OF SECTION 27 • Freedom of Trade & Commerce is a RIGHT protected by the Constitution of India. • Public Policy requires that every man shall be at liberty to work & shall not be at liberty to deprive himself or the state of his labour, skill or talent, by any contract that he enters in to. (Leather cloth co. Vs. Lovsont(1869) • Every man should have unfettered liberty to exercise his powers and capacities for his own and communities benefit.(Vancouver Malt & Shake Brewining co.Ltd. Vs Vancouver Breweries Ltd. (AIR1934)PC101 Rational • It is in the benefit of a State that as much as Trade is done so that as much as people will be employed and will earn better. • Trade brings completion, Quality of goods, Fair prices to be maintained. • To Protect Monopoly as it is bad to the society. • Society should not be deprived of expertise knowledge. SCOPE OF SECTION 27 Madhub Chandra Vs Rajcoomer (1874) PC All restraints whether Partial or General will be covered under section 27. COUCH J laid down “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 some place.” DEVELOPMENTS IN ENGLISH LAW Nordenfelt Vs Maxim Nordenfelt Guns & Ammuniations Company Ltd. (1894) Lord Macnaghten laid down: “The Public have an interest in every persons carrying on his trade freely, so as the individuals. All interferences with individual liberty of action in trading and all restrained of trade themselves, if there is nothing more are contrary to Public Policy and Therefore VOID.” EXCEPTIONS There are 2 kinds of exceptions: 1. Statutory Exceptions 2. Judicial Interpretations Statutory Exceptions: 1. Sale of Goodwill 2. Under the Indian Partnership Act 3. Restraining the Contuning Partner from carrying on any business similar Sec. 11(2) 4. Restraining an outgoing partner from carrying a similar business (sec.36(2)) 5. Restrained in anticipation of Dissolution (Section54) 6. Restrained when Goodwill is sold (Section 55(3)) Exceptions Under Judicial Interpretations
• Trade Combinations • Restrained Upon Employees • Solus Agreements ( Sale through a sole agent or distributor only)