NDA drafting for employees, vendors and mutual business talks

What is an NDA, and which one does your business need?

A non-disclosure agreement (NDA), also called a confidentiality agreement, is a contract in which the person receiving information promises to use it only for a stated purpose and not to pass it on. India has no separate statute for NDAs. The Indian Contract Act, 1872 governs them, a court can order the recipient to stop a breach under the Specific Relief Act, 1963, and Section 73 of the Contract Act allows damages for the loss caused. In practice the document works only if it describes the information and the purpose clearly enough for a judge to see what was promised.

Three situations we draft for most

• Employees and consultants who see pricing, source code, formulas, tender strategy or customer lists. This can be a standalone NDA or confidentiality and assignment terms that sit with the appointment letter.
• Vendors and contractors who receive an RFQ, drawings, a tender pack or access to your systems: IT vendors, printers, packaging suppliers, job workers and agencies.
• Mutual NDAs for business talks, where your company and a prospective customer, supplier or technology firm both open up during scoping, a pilot or a white-label discussion.

Talks with an investor, a fund or a joint venture partner raise different timing and clauses. Our NDA for investors and business partners covers that.

Are NDAs for employees enforceable in India?

Yes, as far as confidentiality goes. Section 27 of the Contract Act makes void any agreement that restrains a person from carrying on a lawful profession, trade or business, and courts apply it strictly to non-compete clauses after employment ends. A promise not to disclose or misuse the employer's confidential information is different, because it does not stop the employee from working. Courts have enforced such promises after exit, while refusing to let an employer pass off a non-compete as a confidentiality clause.

So an NDA for employees should protect identified information, not the person's general skill and experience. During employment a firmer restraint is allowed. In Niranjan Shankar Golikari v Century Spinning (1967), the Supreme Court upheld a promise not to work for anyone else while the contract of service lasted.

How do you draft an NDA for employees at termination?

Exit is when most leaks happen, so we prepare a short exit undertaking to go with the resignation or termination papers. It lists the systems and documents the person had access to and confirms that company devices and copies have been returned or deleted. It also records that no client data remains on personal phones, drives or email, and reminds the person that the confidentiality duty continues.

Have it signed with the full and final settlement, when the person is present and papers are being exchanged anyway. And name the categories of information in the original NDA. Courts hesitate to restrain a former employee on a definition that covers "all information of any nature".

What our NDA drafting covers

• The purpose: the employment, project or tender for which information is shared, and a bar on using it for anything else.
• Confidential information defined by category, with marking rules for documents and written confirmation for what is said in meetings.
• The usual exclusions: information already public, already known to the recipient, lawfully received from someone else, or developed independently.
• Who inside the recipient may see it, and the recipient's responsibility for its staff and sub-contractors.
• Security duties: access controls, no copies on personal devices, and prompt notice to you of any leak.
• Disclosure compelled by law, a court or a regulator, with notice to you where that is allowed.
• How long the duty lasts, with trade secrets and source code covered for as long as they remain secret.
• Return or deletion at the end, confirmed in writing.
• No licence by implication and, for employees and consultants, ownership of the work they create.
• Injunction, damages and costs, the law that governs, and where disputes go: a named court or an arbitration seat.

We leave out what will not hold: a non-compete after the relationship ends, a penalty figure unrelated to any likely loss, and a blanket ban on dealing with every customer. Section 74 of the Contract Act allows only reasonable compensation up to any figure fixed for breach. So we fix agreed damages only where the loss can be estimated.

A vendor that will handle your customers' personal data needs more than an NDA. Section 72A of the Information Technology Act, 2000 already makes it an offence for a person who obtains personal information while providing services under a contract to disclose it without consent, intending wrongful loss or gain. We add data-handling terms, and for a continuing service those belong in the main vendor contract.

How do you draft an NDA that holds up?

Settle four things before writing a word: who will disclose, what exactly they will disclose, why, and for how long. Then decide what happens at the end, return or deletion, and where a dispute will be heard. Most weak NDAs fail on the second point, because the definition is either everything or a vague list that misses what was actually shared.

What you send us

• Names, addresses and CIN, LLPIN or PAN of both parties, and who signs.
• What will be shared, in rough categories, and in what form: files, system access, samples or site visits.
• The purpose, and how long the work or talks are expected to run.
• For employees: the appointment letter and relevant HR policies, so the NDA does not contradict them.
• Any NDA or NDA format the other side has sent.

From brief to signed NDA

1. Brief. Email or WhatsApp us the details. If the purpose is unclear, a short call settles it.
2. Draft or markup. Our draft, or our comments on the other side's NDA, reaches you in 2 to 3 working days.
3. Revision. One round of changes is included, usually after the other side replies.
4. Stamping and signature. Stamp the final version, then sign in ink or with an electronic signature.

For employers we can prepare one master employee NDA that HR issues to every joiner, with a schedule for role-specific information. The work is done online from our Sanpada, Navi Mumbai office for businesses anywhere in India.

Stamping and signing a non-disclosure agreement

A non-disclosure agreement needs no registration. Duty is paid as on an agreement in whichever state the parties sign, usually by e-stamp beforehand, and the amount is modest. When HR signs NDAs with many employees, each executed copy needs its own stamp.

Signing electronically, as the Information Technology Act, 2000 permits, is valid, but it does not remove stamp duty. Skipping the stamp does not make the NDA void. It does mean you cannot rely on it in court until the duty and a penalty are paid, which costs time precisely when you want an order at short notice.

Mistakes with employee and vendor NDAs

• A post-exit non-compete dressed up as confidentiality. Courts read the substance, and the doubt can spread to the valid parts.
• Signing after the drawings or data have gone out. Have the NDA signed before the RFQ, the demo or the first login.
• A vendor NDA that binds the vendor but not its freelancers or sub-contractors.
• No return or deletion clause, so your files stay on a former vendor's server indefinitely.
• A mutual NDA copied from a US template that names a foreign court and foreign law for a dispute between two Indian companies.
• Relying on an old offer letter clause for staff who now handle far more sensitive material than when they joined.

Related drafting services

If a vendor relationship goes ahead, the confidentiality terms move into a full vendor agreement (from Rs 3,000), and measured service targets go into a service level agreement. When a former employee or vendor misuses your information, a legal notice (from Rs 5,000) demanding that they stop and return the material is usually the first step. For wider staff issues, see our employment law practice.