Non-Disclosure Agreement in India: Essential Features

Non-Disclosure Agreement in India

One of the usual ways of protecting confidential information given to a party is through Non- disclosure agreement. A Non- disclosure agreement is a form of a contract that prohibits the parties to the contract from disclosing the confidential information. Now it is critical to know what confidential information is. In simple words, it is something that needs to be kept secret. It could be information about a new invention, a secret recipe, a data of the company, or information given to employees during their employment.  It is also called a Confidentiality agreement in India. In India, the non-disclosure agreement is governed by the Indian Contract Act of 1872. For it to be valid, the agreement must be registered under the Registration Act 1908. The non-disclosure agreement is an essential contract for the protection of the business. Lack of such agreement may result in a breach of information, data theft which can threaten the company. The rights and the duties of parties are laid down in the agreement which has to be followed by the parties.  

Some of the common Non-Disclosure agreement used in India includes unilateral non-disclosure agreement i.e. between two parties, bilateral non-disclosure agreement and multilateral non-disclosure agreement i.e. between more than two parties. In India, the importance of non-disclosure agreement is crucial for business needs, merger, and acquisition which involves complex information that needs to be protected, a collaboration between two companies, employment contracts, securing seed funding, or investment and it plays an important role for companies entering into franchising agreements.

The Non-disclosure agreement in India must have some important clauses that must be included while drafting a Non-disclosure agreement. The names of the parties must be included and the definition of the confidential information must be stated in the agreement. Information that is already among the public domain, information that have been disclosed, information that are independently developed by the recipient without the use of the confidential information of the disclosing party or information that has been disclosed by a party who has no duty of such confidentiality to the disclosing party are exempted from confidentiality. Apart from it, the time period of such agreement till which the agreement would be binding on parties, rights, and liabilities of the parties to the agreement, scope of compensation in case of breach of agreement and dispute redressal mechanism like arbitration and mediation clause must be included in the Non-disclosure agreement. The agreement is essential as there are a number of benefits attached to it. One of the common benefits is that it protects the confidential information pertaining to the parties to the agreement and provides provision of remedy in case of breach of the agreement. The remedy can be in the form of compensation or damages to the aggrieved party. It is crucial in occasions where the parties are dealing in commercial business.

Anywhere where there is a need for protection of confidential information there a Non-disclosure agreement is highly effective but for parties to enter into such agreement it is vital that the information for which they seek protection must be classified as confidential.

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