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Non-Disclosure Agreement (NDA)

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What is Non-Disclosure Agreement (NDA)

A Non-Disclosure Agreement (NDA), also known as Confidentiality Agreement, is entered between 2 or more parties to preserve and protect the confidential information (such as cost and pricing, projected capital investments, inventory, marketing strategies, customer lists, trade secrets, amongst others) received in the course of transaction, from further disclosure. NDAs can be categorized as: 

1. Unilateral NDAs, where only one party discloses the confidential information to the other(s).

2. Bilateral NDA, where both the parties disclose certain confidential information to each other and such information is prohibited from any further disclosure to a third party.

3. Multilateral NDAs, where all the parties to the agreement disclose the confidential information to each other and such information is prohibited from further disclosure to any other party.

FREQUENTLY ASKED QUESTIONS 

1. Are NDAs binding and enforceable?

An NDA is a valid agreement under the Indian Contract Act 1872. There have been various cases where both the Supreme Court as well High Courts have issued injunctions against former business associates to prevent disclosure of information covered under the agreement. 

2. What kind of information can be protected under an NDA?

While there is no certain law which states what information is considered confidential, the following have been held to be confidential information as per the Indian courts 

2.1 Trade Secrets

2.2 Client lists

2.3 Industrial drawings

2.4 Intellectual Property

2.5 Prototype products

2.6 Proprietary documents

2.7 Manufacturing processes

3. Can an employee be bound by an NDA post-termination of employment?

Yes, an employee can be bound by NDA post his termination. The same has been upheld by the Delhi as well by the Bombay High court. 

4. Are there any exceptions to the disclosure of confidential information?

While there are no express exceptions towards the disclosure of confidential information protected through NDAs, however, a person may disclose confidential information under the following circumstances 

4.1 Where the disclosure is required under law or by a statutory authority;

4.2 Where the information has been disseminated into the public domain; or

4.3 Such disclosure is permitted by the owner of the confidential information


 


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