𝗪𝗜𝗣𝗣𝗥𝗢 𝘃𝘀. 𝗖𝗢𝗚𝗡𝗜𝗭𝗔𝗡𝗧 𝗧𝘂𝘀𝘀𝗹𝗲 ,NON COMPETE CLAUSE -

 

WHY COGNIZANT DECIIDED TO PAY Rs 4 Crores to WIPRO FOR RETAINING  ITS CFO JATIN DALAL  JOINED FROM WIPRO – NON COMPETE  CLAUSE -

𝗪𝗜𝗣𝗣𝗥𝗢 𝘃𝘀. 𝗖𝗢𝗚𝗡𝗜𝗭𝗔𝗡𝗧 𝗧𝘂𝘀𝘀𝗹𝗲

There was a tug-of-war between Wipro and Cognizant—over a non-compete clause present in the Jatin Dalal appointment contract with WIPRO.

Wipro alleged Dalal's appointment as Cognizant's CFO violated a non-compete clause, which lists 10 of Wipro's competitors and states that he cannot work in any capacity with them for 12 months after his exit as per non-compete clause in his employment with WIPRO.

In its petition, Wipro asked for 251.5 million rupees ($3.02 million) plus interest in damages, as well as a permanent injunction on Dalal from being able to share company-sensitive details with Cognizant.

WHAT IS A NON-COMPETE AGREEMENT ?

A Non-Compete Agreement (NCA) is a contract where one party agrees not to compete against the other.

When two parties exchange sensitive business information, one party could exploit that information to gain an unfair competitive advantage. A Non-Compete Agreement can help deter and limit this kind of competition.

HOW NON-COMPETE CLAUSE HELPS THE EMPLOYER ?

• Protect confidential information. The agreement includes a confidentiality clause to protect everything from trade secrets to customer lists.
• Get legal recourse. If the other party begins competing against you unfairly, you can rely on the contract to seek injunctive relief to stop the behavior.

➤ 𝗧𝗵𝗲 𝗖𝗮𝘀𝗲:

 ↳ After a 20-year-long career at Wipro, Jatin Dalal moved to Cognizant (Wipro’s IT rival) as their CFO in September 2023. However, this transition wasn’t smooth.

·       Wipro filed a lawsuit against Dalal for breaching the non-compete clause in his employment contract.

·       Wipro sought ₹25 crore in damages for the contravention of Non-Compete clause

➤ 𝗧𝗵𝗲 𝗦𝗲𝘁𝘁𝗹𝗲𝗺𝗲𝗻𝘁

The Dispute went into arbitration ( Note Arbitration is a good alternative for long litigation process.

Cognizant announced they would support their new CFO, covering legal fees and paying half a million dollars in settlement.

This pattern suggests a tightening of Wipro’s contractual enforcement, especially under the leadership of their new CEO, Srinivas Pallia.

➤ 𝗘𝗻𝗳𝗼𝗿𝗰𝗲𝗮𝗯𝗶𝗹𝗶𝘁𝘆 𝗼𝗳 𝗡𝗼𝗻-𝗖𝗼𝗺𝗽𝗲𝘁𝗲 𝗖l𝗮𝘂𝘀𝗲𝘀 𝗶𝗻 𝗜𝗻𝗱𝗶𝗮:

In response, Dalal said that non-compete clauses were in violation of Section 27 of the Indian Contract Act and therefore unenforceable.

𝙎𝙚𝙘𝙩𝙞𝙤𝙣 𝟮𝟳 𝙤𝙛 𝙩𝙝𝙚 𝙄𝙣𝙙𝙞𝙖𝙣 𝘾𝙤𝙣𝙩𝙧𝙖𝙘𝙩 𝘼𝙘𝙩, states that agreements restraining anyone from lawful profession, trade, or business are void.

This makes non-compete clauses unenforceable post-employment.

➤ 𝗝𝘂𝗱𝗶𝗰𝗶𝗮𝗹 𝘃𝗶𝗲𝘄

In 𝘚𝘶𝘱𝘦𝘳𝘪𝘯𝘵𝘦𝘯𝘥𝘦𝘯𝘤𝘦 𝘊𝘰𝘮𝘱𝘢𝘯𝘺 𝘰𝘧 𝘐𝘯𝘥𝘪𝘢 𝘗𝘳𝘪𝘷𝘢𝘵𝘦 𝘓𝘪𝘮𝘪𝘵𝘦𝘥 𝘷. 𝘒𝘳𝘪𝘴𝘩𝘢𝘯 𝘔𝘶𝘳𝘨𝘢𝘪 (1979), an employee was restricted from working with competitors in Delhi for two years post-employment. The Supreme Court held such a restraint as void and unenforceable.

In Dalal’s case, Wipro argued that his new role at Cognizant, a direct competitor, would inevitably involve using sensitive information acquired during his tenure at Wipro.

Dalal’s legal team pushed for arbitration, and the parties settled recently.

𝗪𝗵𝗮𝘁 𝗱𝗼𝗲𝘀 𝘁𝗵𝗶𝘀 𝘁𝗲𝗹𝗹 𝘂𝘀 𝗮𝗯𝗼𝘂𝘁 𝘁𝗵𝗲 𝗜𝗧 𝗶𝗻𝗱𝘂𝘀𝘁𝗿𝘆 𝗮𝗻𝗱 𝗰𝗼𝗿𝗽𝗼𝗿𝗮𝘁𝗲 𝗹𝗲𝗴𝗮𝗹 𝗯𝗮𝘁𝘁𝗹𝗲𝘀?

⚫      𝗡𝗼𝗻-𝗰𝗼𝗺𝗽𝗲𝘁𝗲 𝗰𝗹𝗮𝘂𝘀𝗲𝘀 𝗮𝗿𝗲 𝗻𝗼𝘁 𝗷𝘂𝘀𝘁 𝗹𝗲𝗴𝗮𝗹 𝗳𝗼𝗿𝗺𝗮𝗹𝗶𝘁𝗶𝗲𝘀; they are fiercely defended, especially at senior levels where sensitive information is at stake.

⚫     𝗧𝗵𝗲 𝘀𝗲𝘁𝘁𝗹𝗲𝗺𝗲𝗻𝘁 𝗮𝗺𝗼𝘂𝗻𝘁—₹𝟰 𝗰𝗿𝗼𝗿𝗲—is a significant sum but is only a fraction of what Wipro initially demanded. This disparity indicates that settlements often reflect practical considerations over theoretical claims.

It’s a reminder that such issues are as much about negotiation as it is about law.

This case emphasizes how a confidentiality clause will protect everything from trade secrets to customer lists for an employer.

•If the other party begins competing against you unfairly, you can rely on the contract to seek injunctive relief to stop the behavior.