Indian Partnership Act provides four situations under which partners can enter into an agreement in restraint of trade.
The concerned sections are:
S. 11(2), provides that partners during the continuance of the firm may restrict their mutual liberty by agreeing that none of them shall carry on any business other than that of the firm.
S. 36(2), of the Indian Partnership Act enables that partners to restrain an outgoing partner from carrying on a similar business within a specified period or within specified local limits, the restrictions imposed must be reasonable.
S. 54, partners may upon or in anticipation of the dissolution of the firm make an agreement that some or all of them will not carry on a business similar to that of the firm within a specified period or local limit, the restrictions imposed must be reasonable one.
S. 55(3), any partner may, upon the sale of goodwill of a firm, make an agreement with the buyer that such partner will not carry on any business similar to that of the firm within a specified period or within specified local limits, the restrictions imposed should be reasonable.