“Doctors Are Not Factory Workmen”: Madras High Court Holds Non-Compete Clause On Doctors Void

A doctor cannot be treated like a workman in a factory or a regular employee in a technology company, and a hospital cannot restrain a medical professional from practising through post-termination non-compete clauses, the Madras High Court has held.

Observing that such restrictive covenants are void in law, court dismissed a plea by MIOT Hospitals Private Limited seeking appointment of an arbitrator against a former consultant surgeon and imposed costs of Rs 1 lakh on the hospital.

The bench of Justice N Anand Venkatesh was dealing with a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, filed by MIOT Hospitals in relation to a professional agreement dated September 8, 2022 entered into with Dr Balaraman Palaniappan.

Under the agreement, the doctor was appointed as a Consultant Cardio Thoracic Surgeon. The hospital stated that it had deployed him on short-term overseas secondments, including assignments in Fiji. The agreement contained restrictive covenants, including a three-year non-solicitation clause and a three-year non-compete clause restraining the doctor from joining a “rival hospital” or setting up practice within a 15 km radius after termination.

The hospital alleged that the doctor resigned through an email dated April 21, 2025 and failed to comply with Clause 10.2, which required three months’ notice or payment of three months’ professional fees in lieu thereof. It further contended that by joining Apollo Speciality Hospital, he had violated the non-solicitation and non-compete clauses, and claimed Rs 42 lakh as liquidated damages, equivalent to three months’ professional fees.

After issuing a legal notice and a trigger notice under Section 21 of the Act invoking the arbitration clause, the hospital moved the high court seeking appointment of a sole arbitrator. Opposing the plea, the respondent doctor contended that the restrictive covenants were void under Sections 23 and 27 of the Indian Contract Act, 1872, as they restrained him from exercising his lawful profession.

The high court agreed. It observed that a doctor, by the very nature of the services rendered, cannot be treated as a regular employee. Hospitals, it said, merely utilise the services of qualified professionals to run their operations.

“Doctors can thrive without hospitals whereas a hospital can never exist without doctors,” court noted, adding that concepts borrowed from commercial business parlance cannot be imported into the medical profession.

Examining Clause 8 of the agreement, court held that restraining a doctor from joining another hospital or practising within a geographical limit after termination directly offends Section 27 of the Contract Act.

Such covenants are also opposed to public policy under Section 23 and therefore void ab initio to that extent, court said.

On the question of notice, court found that the respondent had submitted a resignation letter as early as January 29, 2024, seeking to be relieved by April 29, 2024, thereby giving the requisite three months’ notice under Clause 10.2. The hospital’s reliance solely on the April 21, 2025 email, while ignoring the earlier resignation, was rejected.

Holding that no arbitrable dispute survived and that the restrictive clauses themselves were unenforceable, the court dismissed the arbitration original petition and imposed costs of Rs 1 lakh on the hospital, payable to the respondent doctor.

Case Title: MIOT Hospital Private Limited vs. Dr.Balaraman Palaniappan

Order Date: February 23, 2026

Bench: Justice N Anand Venkatesh