Almost every commercial conversation in India now starts with an NDA, and most of those NDAs were downloaded, adapted from an American template, and signed without anyone asking the question that matters: if this is breached, what exactly would a court do about it?
For a large number of them, the honest answer is very little. Not because Indian courts refuse to protect confidential information — they do — but because the agreement asks for the wrong thing, defines nothing with precision, or bundles an enforceable obligation together with an unenforceable one and weakens both.
The provision that decides most of it
Section 27 of the Indian Contract Act, 1872 is short and consequential:
Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.
There is a statutory exception for the sale of goodwill of a business, within specified local limits and so long as the buyer carries on a like business there.
Indian law on restraint of trade is stricter than English or American law in an important respect: section 27 does not, on its face, admit a general test of reasonableness for post-contractual restraints. A restraint that operates after the contract ends is, broadly, void — whether or not it looks reasonable.
That single provision decides the fate of most of the clauses businesses care about.
Why confidentiality survives where non-compete does not
The distinction is precise and it is worth getting right, because it explains what to put in an agreement and what to leave out.
A non-compete restrains a person from doing business. It stops them working for a competitor, or setting up on their own. It restrains the exercise of a lawful profession, trade or business — and after termination, it falls squarely within section 27.
A confidentiality obligation restrains the use of information. It does not stop a person working anywhere. It stops them using or disclosing something that belongs to someone else. That is not a restraint of trade, and courts have consistently treated it as outside section 27.
A non-solicitation obligation sits between the two and is closer to the confidentiality end. A clause preventing a departing employee from soliciting the employer’s clients or poaching its staff does not prevent them from working; it prevents a specific course of conduct. These have been more readily enforced than non-competes, though outcomes turn on how the clause is framed and how narrow it is.
The practical conclusion for drafting: put the protection in confidentiality and non-solicitation, not in a post-termination non-compete. An agreement heavy with unenforceable non-compete language and light on precise confidentiality obligations is protecting the wrong thing — a point that applies equally to the restraint clauses in vendor and distribution agreements.
A restraint operating during the term of employment or the contract is a different matter and is generally enforceable, because the person is not being restrained from trade — they are performing a contract they agreed to.
India has no trade secrets statute
This is worth stating plainly because it changes what an NDA is doing.
India has no dedicated trade secrets legislation. Protection comes from three overlapping sources: the contract itself, the equitable action for breach of confidence, and, where applicable, other statutes such as copyright for the form in which information is expressed.
The consequence is that the agreement is not merely evidence of an obligation. It is very substantially the source of it. What the document defines as confidential, and what it obliges the recipient to do, is close to the whole of the protection.
That is why a vague NDA is worse in India than in jurisdictions with a statutory floor. There is no floor.
What makes an NDA enforceable
Four things, in rough order of how often they are missed.
Definiteness. An agreement whose central obligation cannot be identified is difficult to enforce. If “confidential information” is defined as “all information disclosed”, a court is being asked to restrain the use of everything the recipient learned, including what they already knew and what is public. Courts do not grant injunctions in those terms.
A legitimate interest. The information must be something the discloser has a genuine interest in protecting — customer data, pricing, formulations, source code, business plans. Information that is public, or that is simply the recipient’s own accumulated skill and experience, is not protectable.
Proportionate obligations. A clause that prevents the recipient from working in the sector at all, dressed up as confidentiality, will be read for what it is.
A workable remedy. Discussed below, and the most commonly neglected.
The definition clause
This is the operative provision of the entire agreement, and most templates handle it badly.
Define by category, with examples. Financial information, customer and supplier lists, pricing, technical data, source code, designs, business plans, and information marked or identified as confidential. Categories give a court something to work with; “all information” does not.
Deal with the marking question. Requiring everything to be marked “Confidential” is clean but unrealistic, because oral disclosures and hurried exchanges never are. Requiring nothing to be marked makes the scope unlimited. The workable middle: information marked as confidential, plus information that a reasonable person would understand to be confidential from its nature or the circumstances of disclosure.
Include the standard exclusions, because their absence makes the clause over-broad. Information that is or becomes public without breach; was already in the recipient’s possession without obligation; is independently developed without reference to the disclosed information; or is lawfully received from a third party without restriction.
Deal with compelled disclosure. Where disclosure is required by law, by a court or by a regulator, the recipient should be permitted to disclose, with an obligation to give prompt notice where lawful so the discloser can seek protection.
Name the permitted recipients. Employees, advisers and affiliates who need to know, on terms no less protective, with the recipient remaining responsible for their compliance.
Term, and the mistake of a short one
Two periods need to be distinguished, and templates routinely conflate them.
The term of the agreement — how long information may be disclosed under it.
The term of the confidentiality obligation — how long the recipient must keep what was disclosed.
These are not the same. A two-year agreement with confidentiality obligations expiring with it means that everything disclosed becomes free to use in year three. For a formulation, a customer list or source code, that is usually not what the discloser intended.
The workable approach is a defined term for disclosure and a longer, separately stated period for the obligation — or, for genuine trade secrets, an obligation that continues for so long as the information retains its confidential character. Indefinite obligations over ordinary commercial information are harder to defend; indefinite obligations over a genuine trade secret are not unreasonable.
Remedies, and why the injunction is the point
Damages for breach of confidence are notoriously hard to prove. The loss is the value of information that has escaped, and quantifying it after the fact is close to impossible.
The remedy that matters is therefore the injunction — an order restraining further use or disclosure, and in appropriate cases requiring delivery up or destruction. The Specific Relief Act, 1963 governs injunctions, and a court may grant an injunction to restrain the breach of a negative agreement even where it could not compel performance of the affirmative part.
Three drafting consequences follow.
Acknowledge that damages are an inadequate remedy and that injunctive relief is appropriate. A court is not bound by that acknowledgement, but it removes an argument.
Do not cap liability for confidentiality breaches. A limitation of liability clause that inadvertently caps the confidentiality obligation at the value of fees paid substantially defeats the agreement. Confidentiality should sit outside the cap.
Make the dispute clause work for urgent relief. Where arbitration is chosen, the agreement should preserve the right to seek interim relief from a court, because an arbitral tribunal takes time to constitute and confidential information does not wait.
Employee NDAs are a different animal
The same words behave differently in an employment contract, and three points should shape the drafting.
Skill and knowledge are not confidential information. An employee is entitled to use the general skill, experience and know-how acquired in employment. The line between that and the employer’s confidential information is where these cases are actually fought, and a definition that tries to capture everything the employee learned tends to fail.
Garden leave and notice periods are generally more effective than post-termination restraints. A restraint operating during employment, while the employee is still paid, does not engage section 27 in the same way as one operating afterwards.
Non-solicitation is the realistic protection. Framed narrowly — clients the employee actually dealt with, within a defined period — it is considerably more defensible than a non-compete.
An NDA that is part of a broader documentation set sits alongside the founders’ and shareholders’ agreements and the other instruments covered in our note on the types of commercial agreements.
A drafting checklist
- Parties — including whether affiliates are covered, on both sides.
- Definition of confidential information — by category, with the marking position resolved.
- Exclusions — public domain, prior possession, independent development, third-party receipt.
- Permitted disclosures — need-to-know recipients, and compelled disclosure with notice.
- Obligations — use restriction as well as disclosure restriction. An agreement that prohibits disclosure but not use leaves the recipient free to exploit the information itself.
- Term — separate periods for the agreement and for the obligation.
- Return or destruction on termination, with an exception for archival copies and a note that the obligation survives for retained copies.
- No licence — express statement that disclosure grants no rights in the information.
- Remedies — acknowledgement on injunctive relief; confidentiality carved out of any liability cap.
- Governing law, jurisdiction and dispute resolution — one clause, internally consistent, preserving access to a court for urgent interim relief.
- Stamp duty and execution — executed properly, stamped as required in the relevant State, and with authority to sign established.
Whether the agreement is mutual or one-way is a commercial question, but a one-way NDA imposed on a party that will inevitably disclose something of its own is a frequent source of friction and is usually better made mutual at the outset. The wider drafting discipline is covered in our note on legal documentation, and the entity-level questions in corporate and commercial law.
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