Drafting an NDA in India: What Founders Should Know

Drafting a non-disclosure agreement in India means writing a contract under the Indian Contract Act, 1872, defining exactly what counts as confidential, naming a permitted purpose, and keeping the restrictions narrow enough to avoid Section 27's bar against restraint of trade. India has no dedicated trade secrets statute, so the wording carries the entire weight of protection.

Key Takeaways

• Legal basis: An NDA in India is an ordinary contract under the Indian Contract Act, 1872, not a filing with any registry or IP office.
• Section 27 risk: A confidentiality clause that reads like a trade restraint, blocking someone from working in a field rather than from disclosing specific information, risks being struck down as void.
• Definition is the load-bearing clause: A vague description of "confidential information" is both over-broad and under-protective, and courts have treated such definitions as unenforceable in practice.
• No standalone statute: India protects trade secrets through contract and common law only, which makes the drafting quality of the NDA itself the main line of defence.
• An NDA is not a complete trade secret programme: access controls, employee exit protocols and internal documentation matter as much as the signed agreement.

At a Glance: NDA Essentials in India

What Makes an NDA Enforceable Under Indian Contract Law?

An NDA is enforceable in India when it meets the basic elements of a valid contract: free consent, lawful object and lawful consideration, and when its confidentiality restriction does not amount to a restraint of trade. Nothing more, and nothing less, is required.

There is no dedicated NDA statute in India. The agreement is judged the same way any other contract is judged, under the general principles of the Indian Contract Act, 1872. That sounds simple, but it creates a specific trap.

Section 27 of the Act declares that any agreement restraining a person from exercising a lawful profession, trade or business is void, to that extent. India never adopted the English common-law "reasonableness" test that lets some non-compete restrictions survive.

A confidentiality clause drafted too broadly, one that stops a former employee or partner from working in a field rather than from disclosing specific information, can be read as a restraint of trade and struck down on that ground.

The practical fix is to keep the NDA about information, not about activity. It should say what cannot be disclosed or used, not where someone cannot work or who they cannot compete with. Courts have distinguished between clauses that restrain solicitation of specific confidential material, which can stand, and clauses that restrain a person's ability to earn a living, which generally cannot.

Because India has no standalone trade secrets law, the NDA itself has to do the work that a registration system would otherwise do. There is no Trade Secrets Office to file with and no certificate to point to later.

The contract, and how carefully it is worded, is the protection. A related discussion of how confidentiality obligations interact with other safeguards a manufacturer might use appears in protecting trade secrets in India through employee exit protocols.

1. Identify the Parties and the Type of NDA Needed

Start by naming every party accurately, using their full legal names, registered addresses, and company identification details where applicable. A founder negotiating with a single vendor or freelancer typically needs a unilateral NDA, where only one side discloses sensitive information. A founder in early investor talks, a joint development arrangement, or a manufacturing tie-up usually needs a mutual NDA, because both sides will share something the other should not repeat.

Getting this choice wrong is a common founder mistake. A mutual NDA signed when only one party is actually disclosing anything gives the other side confidentiality obligations it never has to honour in practice, while diluting the drafting attention that should have gone into the one-way flow of information.

Also record the effective date and the underlying business purpose in the recitals. This becomes relevant later if a dispute turns on when the confidentiality period started running, or what the parties were actually trying to achieve when they signed.

2. Define "Confidential Information" Precisely

The definition of "Confidential Information" decides whether the whole agreement holds up. A phrase like "any information shared between the parties" looks protective but is not: it covers everything and therefore, in practice, nothing.

Many NDAs used by Indian founders are lifted from foreign templates and dropped in without adjustment. These often carry clauses shaped around common-law doctrines or statutory trade secret definitions that simply do not exist under Indian law, leaving gaps an Indian court has no matching provision to fill.

A workable definition does two things. It lists categories of information covered, such as technical specifications, source code, pricing models, customer lists or manufacturing processes. Then it carves out standard exclusions: information already public, information the receiving party already held lawfully, and information independently developed without reference to the disclosure.

Background on how a single clause of this kind is typically reviewed on a standalone basis is set out in contract drafting and vetting services in India.

3. State the Permitted Purpose

Every NDA should say, in plain terms, why the information is being shared. A permitted purpose clause limits how the receiving party can use what it learns, separate from limiting what it can disclose.

A typical formulation restricts use to "evaluating a potential commercial partnership" or "assessing a proposed investment," and nothing beyond that. Without this clause, a recipient who never discloses anything to a third party could still use the information for an unrelated purpose, such as building a competing product, without technically breaching a definition-only NDA.

This clause matters most in funding conversations and vendor evaluations, where the discloser's real concern is not gossip but repurposing: an investor who passes on a pitch, or a manufacturer who reverse-engineers a process after seeing it during due diligence.

4. Set Obligations, Term and Post-Termination Survival

Obligations, duration and survival are where founders most often leave gaps. What survives termination is not what the parties assume; it is only what the contract states.

The obligations clause should spell out what the receiving party must actively do: restrict access to employees on a need-to-know basis, use reasonable security measures, and notify the disclosing party if a breach occurs or is suspected. Passive silence is not the same as active protection, and a court assessing a breach will look at what the receiving party actually did.

The confidentiality term is negotiated, not fixed by statute. A common structure runs the obligation for a set period after signing, then extends it further, or indefinitely for certain categories like trade secrets, after the agreement itself ends. Without an explicit survival clause, there is a real risk that confidentiality obligations are read as ending the moment the underlying business relationship does, exactly when the temptation to use the information is highest.

This is one reason NDAs used inside a funding round or founder exit often sit alongside a broader agreement. Where a co-founder split or exit is being negotiated at the same time, the confidentiality terms should be checked against the founders agreement governing that relationship, so the two documents do not contradict each other on what survives and for how long.

5. Address Remedies and Governing Law

An NDA needs a remedies clause because damages alone rarely fix a confidentiality breach after the fact; by the time a case is decided, the information may already be public or already used by a competitor.

Most well-drafted NDAs in India expressly acknowledge that a breach may cause harm that money cannot adequately compensate, and that the disclosing party may seek injunctive relief from a competent court, in addition to damages. Courts still decide whether an injunction is warranted on the facts, but stating this expectation in the contract removes ambiguity about what relief the parties contemplated.

The governing law and jurisdiction clause should name a specific court, or an arbitration mechanism under the Arbitration and Conciliation Act, 1996, particularly where the parties sit in different states. How coordination across states is typically structured is discussed in pan-India counsel versus hiring local firms in each state.

When Does an NDA Stop Being Enough for Trade Secrets?

An NDA stops being sufficient the moment the information at risk needs protection beyond what a signature can provide, such as a manufacturing process, a formulation, or source code that many employees can access day to day. A contract deters and creates a remedy after the fact; it does not physically stop copying, memorising or leaking.

Because India has no registration system for trade secrets, protection depends entirely on the business proving, if a dispute arises, that it treated the information as secret in practice, not just on paper. That means restricting physical and digital access, marking documents appropriately, and logging who saw what and when.

A signed NDA with a vendor or investor covers one relationship. It does nothing about the employee who leaves for a competitor eighteen months later carrying process knowledge in their head rather than on a device.

That risk is addressed through onboarding and exit protocols, not through the NDA text itself. Further detail on this, covering what a manufacturer or product business might put in place around, not instead of, its confidentiality agreements, appears in an employee exit checklist for trade secret protection.

The honest position for a founder to take is that an NDA is necessary but not sufficient. Businesses that treat the signed document as the finish line, rather than the starting point of a broader confidentiality practice, are the ones most exposed when something actually leaks.

Frequently Asked Questions

Is an NDA legally binding in India?

Yes, an NDA is legally binding in India when it satisfies the basic elements of a valid contract under the Indian Contract Act, 1872: free consent, a lawful object and lawful consideration, and when its restrictions do not amount to a restraint of trade under Section 27.

No special registration or government filing is required to make an NDA binding. What matters is contract validity, not any administrative step.

Can an NDA be enforced against a former employee?

An NDA's confidentiality obligation can survive employment and bind a former employee regarding specific confidential information, but a clause that stops them from working in the same field or industry risks being read as a restraint of trade.

Courts have distinguished between restraining disclosure of identified confidential material, which can stand, and restraining a person's ability to take up lawful employment elsewhere, which Section 27 generally voids.

Does an NDA need to be registered or stamped in India?

An NDA does not need to be registered with any government authority to be enforceable. Depending on the state where it is executed, it may need to be executed on appropriate stamp paper or e-stamped, since stamp duty rules on contracts vary by state.

Founders working across multiple states, including NRIs entering agreements with Indian counterparties, should confirm the applicable state's stamping requirement before execution rather than assuming a uniform national rule. Background on organising the relevant facts for such matters in advance is set out in what to prepare before an NRI virtual consultation.

How long should an NDA's confidentiality obligation last?

There is no statutory duration for an NDA's confidentiality period in India; it is set entirely by negotiation between the parties. A term of two to five years after signing, with certain categories surviving longer or indefinitely, is a common structure, but nothing in the Contract Act fixes this figure.

What matters more than the specific number is that the term and its survival past termination are stated explicitly, so neither party can later argue the obligation lapsed by default.

Can one NDA cover a business operating across multiple Indian states?

A single NDA can cover parties and disclosures across multiple Indian states, since the Indian Contract Act, 1872 applies uniformly across the country. What varies by state is stamp duty treatment, not the underlying contract law.

Businesses with counterparties, litigation or disclosures spread across several states more often need coordinated representation than a different NDA for each location; the drafting principles stay the same nationally.

This content is published for general information only. It is not legal advice, an advertisement, or a solicitation of work, and reading it does not create an advocate-client relationship. In keeping with the Bar Council of India Rules, Riva Legal Associates does not solicit work or advertise.