RESTRAINED OF TRADE

Dr. GAURAV VARSHENEY

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)