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Ex-employee started business with employer’s clients

Shivendra Pratap Singh

Advocate (Lucknow)

Online advising since Oct. 2014

Civil Law

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Question: My employee started his own business without my consent and he converted my business to his firm. He used all my clients data and relations he built up as my employee for his personal benefit. While he is doing so, he enjoys all benefits like salary allowance. Can I file a criminal case against him? If possible, which section in IPC?

Question from: Kerala

You can sue him for the loss you suffered from the breach of contract and fraud. He has breached the terms of agreement when he used the data of clients. As per the standard agreement between the employer and employee the employee cannot do business with the clients of the employer. If he does so he shall be liable to compensate the employer. 

As you said that he has used your clients data for establishing business relations with them. This act constitutes fraud under Section 17 of the Indian Contract Act.

File a civil suit

You should file a civil suit for the damages or compensation for the loss you suffered due to fraud and breach of your ex-employee. He is bound to compensate because he has deceived you by stealing data of clients and doing business with them. 

Section 73 of the Indian Contract Act gives you a right to claim damages for the loss. It is an undisputed fact that he was your client. Before joining he had no business with your clients. After quitting the job he has started his own business and dealing with your clients. These facts are sufficient to prove that he has deceived you by stealing data of your clients.

Can an Employee of a Private company start his own company while working?

Question: I was working in a Private Company. My employer terminated me as I have started my own company during my job. My employee contract does not mention stopping any employee to start another company. Can an Employee of a Private company start his own company while working? There was nothing mentioned in the Employee Contract to stop an Employee. Can I request you to send me any legal documents to prove this as per company law or any document?

Asked from: Gujarat

If the work contract does not restrict the employee to open own company while working with the employer’s company, the employer cannot claim that the employee has breached the work contract because the employee has owned a company during employment. 

You should claim compensation against the employer (company) for the breach of work agreement. You should send a legal notice and claim compensation because you have lost a job due to breach of agreement. 

Failing which, you can lodge a case against the company in the labour tribunal. If you wish you can file a civil suit instead of filing a case before the labour tribunal.


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shivendra pratap singh advocate

Shivendra Pratap Singh

Advocate (Lucknow)

You can consult on Criminal, Civil, Matrimonial, Writ, Service matters, Property, Revenue and RERA related issues.

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