Signing an NDA in India? Check These Five Clauses First

Why does the NDA matter more in India?

India does not have a standalone trade secrets statute. Protection for confidential business information rests on contract, together with established principles of equity on breach of confidence, rather than on a dedicated Act setting out what a trade secret is and what remedies follow. The Law Commission of India has recommended a dedicated law, but none has been enacted.

That has a practical consequence. Where a trade secrets statute exists, an NDA supplements a statutory baseline. In India the agreement is doing more of the work, which is a reason both to take the drafting seriously and to be sceptical of an agreement that reaches well beyond protecting information.

Breach is usually enforced through damages under Section 73 of the Indian Contract Act, 1872 and injunctions under the Specific Relief Act, 1963. Section 72A of the Information Technology Act, 2000 also makes it an offence, in some circumstances, to disclose personal information obtained under a lawful contract without consent.

One: how is confidential information defined?

Read the definition before anything else. A workable definition covers information that is marked confidential, or that a reasonable person would understand to be confidential given the circumstances of disclosure.

A risky one covers 'any and all information disclosed in any form, whether or not identified as confidential'. Under that drafting a passing remark in a meeting is covered, and you cannot know what you are obliged to protect.

Ask for a marking requirement, with oral disclosures confirmed in writing within a stated period. Sample wording: 'Confidential Information means information disclosed by the Discloser that is marked or identified as confidential at the time of disclosure, or, if disclosed orally, is summarised in writing and identified as confidential within 15 days of disclosure.'

Two: are the standard exclusions there?

A professionally drafted NDA excludes information that is already public, that you already knew, that you develop independently without using theirs, and that you lawfully receive from a third party. A fifth exclusion, for disclosure required by law or court order with notice to the other party where lawful, is standard.

Where these are missing the obligation becomes unworkable rather than merely strict. Without the public information carve-out, a party can assert that you learned from them something described in a dozen trade publications. Their absence is also a signal about how the rest of the document was drafted.

Sample wording for the exclusions: 'Confidential Information does not include information that (a) is or becomes public other than through breach of this Agreement; (b) was lawfully known to the Recipient before disclosure; (c) is independently developed by the Recipient without use of the Confidential Information; or (d) is lawfully received from a third party without a duty of confidence. The Recipient may disclose Confidential Information where required by law or court order, after giving the Discloser prompt notice where lawful.'

Three: how long does confidentiality last?

Perpetual confidentiality for ordinary business information is difficult to justify and difficult to comply with, since you cannot keep indefinite records of what you were told and by whom. A defined term, commonly two to five years from disclosure or from the end of discussions, is the market position for general confidential information.

The structure that satisfies both sides is a fixed term for ordinary information plus a carve-out under which genuine trade secrets remain protected for as long as they keep that character. That gives the disclosing party what it legitimately needs without binding you forever.

If the NDA is silent on duration, do not assume the obligation ends when the discussions do. Ask for a clear end date so everyone knows when the obligation stops.

Four and five: residuals and mutuality

A residuals clause permits the receiving party to use information 'retained in the unaided memory' of its people. If you are the party sharing valuable know-how, that clause substantially undercuts what you thought you were protecting, and it is the term most worth striking. If you are the recipient, for example a consultant who works across many clients, a narrow residuals clause may be reasonable, but expect pushback.

Mutuality is simpler. If both sides will share information, the obligations should run both ways. A one-way NDA in a conversation where you will also be disclosing is worth converting to mutual, and that request is rarely refused.

The five clauses at a glance

What about remedies, venue and arbitration?

Many NDAs contain a pre-agreed acknowledgement that breach causes irreparable harm and that the disclosing party is entitled to an injunction. The Specific Relief Act, 1963 governs when injunctions are granted, and courts decide that on the facts. The acknowledgement is persuasive at most, but it is usually accepted as standard.

Watch the venue. An exclusive jurisdiction clause naming courts far from you can make defending a claim expensive. Indian courts generally uphold such clauses where the chosen court would otherwise have jurisdiction. If the NDA has an arbitration clause, Section 12(5) of the Arbitration and Conciliation Act, 1996, read with the Seventh Schedule, makes certain persons connected with a party ineligible to act as arbitrator, which limits one-sided appointment clauses.

Also check whether the NDA caps or excludes liability, and for whom. A clause making you liable for 'all losses, direct or indirect' without any cap is worth narrowing to direct losses.

Mutual or one-way: which NDA do you need?

A one-way NDA protects only the disclosing party. It suits situations where information flows in one direction, such as a company sharing its product roadmap with a freelance developer before engagement. A mutual NDA binds both sides equally and suits partnership talks, joint pitches, investment discussions and acquisitions, where both sides share sensitive material.

If you receive a one-way NDA but will also disclose your own pricing, methods or code, ask for it to be made mutual. If you are the one sending the NDA, starting with a balanced mutual draft often speeds up signature, because the other side has less to object to.

Who should sign the NDA, and does it bind your team?

If you are signing for a company, check that you are authorised to do so, and sign in the company's name with your designation, not personally. If the NDA names you individually as well as the company, ask why; personal liability for a company's confidentiality obligations is a significant addition.

An NDA signed by a company does not automatically bind each employee personally. It binds the company, which must then ensure that only people who need the information receive it and that they are themselves bound by confidentiality, usually through their employment contracts. A clause making the company responsible for breaches by its employees and advisers is standard. A clause requiring every employee to sign a separate undertaking is heavier and worth discussing if your team is large.

What else is worth a look before you sign?

• Any restraint on working for competitors or soliciting people, which engages Section 27 of the Indian Contract Act, 1872 and is a different matter from confidentiality.
• Return or destruction of materials at the end, with a carve-out for automatic backups and copies the law requires you to keep.
• Whether personal data is in scope, which brings in the Digital Personal Data Protection Act, 2023 and its Rules as they phase in.
• Who within your organisation may receive the information, such as employees and advisers on a need-to-know basis.
• Stamping: an insufficiently stamped agreement faces admissibility problems under Section 35 of the Indian Stamp Act, 1899, or the equivalent provision of a State's own stamp law, such as Section 34 of the Maharashtra Stamp Act, 1958. A seven-judge bench of the Supreme Court held in December 2023 that such a defect is curable and does not make the agreement void.
• Electronic signing, which is generally valid for an NDA under the Information Technology Act, 2000, though stamp duty still applies and many States offer e-stamping.

A five-minute NDA review checklist

• Who are the parties, and is the person signing authorised to bind their company?
• Is the definition limited to marked or reasonably identifiable confidential information?
• Are all five standard exclusions present?
• How long do the obligations last, and from when?
• Is there a residuals, non-compete, non-solicit or non-circumvention clause?
• Where are disputes decided, and is any arbitrator appointed by one side alone?
• Is the document properly stamped for the State where it is executed?