Non-Disclosure Agreements in India: Drafting, Enforceability and Common Mistakes

What is an NDA?

A Non-Disclosure Agreement (NDA) — also called a Confidentiality Agreement — is a contract by which one or more parties agree to keep certain information confidential. NDAs are used in employment, business negotiations, vendor relationships, M&A transactions, and technology licensing.

Types of NDAs

Unilateral NDA: One party discloses; the other receives and agrees to keep confidential. Common in employment and vendor contracts.

Mutual NDA: Both parties disclose and both agree to confidentiality. Common in joint ventures and M&A discussions.

Enforceability Under Indian Contract Act

An NDA is enforceable under the Indian Contract Act, 1872 as a valid contract, provided it meets the essential elements: offer, acceptance, consideration, free consent, capacity, and lawful object.

However, one specific concern in India is Section 27 of the ICA, which states that every agreement in restraint of trade is void. Courts have held that:

• An NDA that merely protects confidential information is not in restraint of trade
• But an NDA combined with an overly broad non-compete clause may partially fall foul of Section 27

Key Clauses to Include

1. Definition of Confidential Information

Be precise. An overly broad definition ("all information shared") may be challenged. A proper definition:

• Lists categories of confidential information
• Excludes publicly available information
• Excludes information already known to the recipient

2. Obligations of the Receiving Party

• Keep information confidential
• Use only for the specified purpose
• Limit disclosure to employees on a need-to-know basis
• Take reasonable steps to protect (same standard as own confidential information)

3. Exclusions from Confidentiality

Information is not confidential if it:

• Was already in the public domain
• Was independently developed by the recipient
• Was received from a third party without confidentiality obligations
• Must be disclosed by law or court order (with notice to the discloser)

4. Duration

State clearly how long the obligation survives — both the term of the agreement and the post-termination confidentiality period. Typical: 2–5 years post-termination for general commercial NDAs; perpetual for trade secrets.

5. Remedies

Include:

• Right to seek injunctive relief without proof of actual damage
• Acknowledgment that breach will cause irreparable harm
• Liquidated damages (if appropriate and a genuine pre-estimate of loss)

6. Governing Law and Jurisdiction

Specify Indian law and the court/arbitration forum for disputes.

Common Drafting Mistakes

• No definition of confidential information — makes the NDA unenforceable
• No exclusions — creates unrealistic obligations
• Unlimited duration — courts may read in a reasonable period
• No remedy clause — weakens enforcement
• Boilerplate non-compete embedded — risks voiding the entire clause under Section 27

Practical Enforcement

If a party breaches an NDA:

1. File for an interim injunction immediately — delay may be seen as acquiescence
2. Seek Anton Piller-type orders (search orders) if there is risk of destruction of evidence
3. Claim damages for loss caused by the breach
4. Consider criminal action for theft of trade secrets under relevant provisions

Conclusion

A well-drafted NDA is a valuable protective instrument. Invest time in getting the definition of confidential information and the remedy clause right — these are the two provisions that make the most difference when it comes to enforcement.