In Brief
In this appeal, Vijaya Bank challenged the High Court's decision quashing a clause requiring an employee to pay Rs 2 lakh in liquidated damages for resigning before completing three years of service. The Supreme Court held that such restrictive covenants during employment do not constitute restraint of trade under the Indian Contract Act, as they operate during the subsistence of employment and do not restrict future employment. The Court found the clause not opposed to public policy, considering the public sector bank's need to compete in a deregulated market and the substantial recruitment costs from premature resignations. The quantum of damages was found reasonable and not disproportionate, allowing the bank's appeal and restoring the clause as valid and enforceable.
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