A non-disclosure agreement is a legal contract made between two or more parties to keep confidential information between them and not to disclose it to the third party. The parties to the contract have no rights to disclose the confidential information to anyone and if any one of the parties to the contract discloses it then he or she has to bear for it. There are certain situations when companies don’t want to disclose their information for a specific reason so, they make this agreement to keep the information confidential.
An NDA is known as:
- “Confidential Agreement”
- “Confidential Disclosure Agreement”
- “Secrecy Agreement”
- “Proprietary Information Agreement”
Types of Non-Disclosure Agreements:
NDA is of three types:-
- Unilateral NDA: This type of non-disclosure agreement says that there are two parties to the contract and one party discloses some information with others and mentions that such information is not further disclosed.
- Bilateral NDA: Here, it says that the two parties to the contract disclose information to each other and they intend that such information is not further disclosed to another.
- Multilateral NDA: This agreement involves 3 or more parties to the contract and one party among them discloses some information to other parties and mention that such information should be protected from further disclosures.
Some common issues mentioned in an NDA are as follows:
- Outlining the parties to the agreement
- The definition of what is confidential
- The disclosure period
- The law and jurisdiction governing the parties
- Types of permissible disclosure
The validity of an NDA with a Legal Aid:
A non-disclosure agreement in India must be registered under the Registration Act, 1908 then only it will be considered as a valid and enforceable document. This agreement or document must be stamped and stamping is necessary to bring this agreement into effect otherwise it will serve no value in the court. The rate of stamp duty varies from state to state. The rate of stamp duty generally ranges from Rs 20 to Rs 100. This registration of the agreement must be done in the office of the Sub-Registrar. After registration and stamp, the agreement comes into effect and it gets value in the courts.
Benefits of Entering into NDA:
Following are some major benefits of entering into an NDA:-
- A Confidential Clause is inserted in the NDA which defines the confidential matters.
- It helps the parties to maintain secrecy between the parties to the contract by binding them legally.
- There are many clauses in the NDA which regulates the parties not to disclose the information and this period could be beyond the effective time of the NDA. The parties are not permitted to disclose the information until the mentioned time in the NDA.
- Anyone violating the terms and conditions of the agreement will be liable to compensate the damages to the aggrieved party.
- If any disputes arise then it could be referred to the arbitrator or to the court if such violation demands it. This is how the aggrieved party is given relief.
When NDA is required:
- It is required into a business deal,
- It is required when a company or any other body takes an expert’s advice on a new product,
- It is required while starting a new project,
- It is required when providing employment,
- It is required while dealing with sensitive client information,
- It is required while discussing commercially sensitive information with other parties, etc.
Terms of an NDA:
It has no time duration that is to say there is no specific time limit of the NDA. It could be 2 years or it maybe 5 years or it may be non-terminating NDA so as to protect the trade secrets permanently. But if there is time period mentioned in the NDA then it should be disclosed to the public if it is meant for the public at large or it may be disclosed to the parties who are meant for it.
Format of NDA:
THIS NON-DISCLOSURE AGREEMENT (the “Agreement”) is entered into on this _______day of_______, 2016 by and between XYZ, having its registered office at_____________________(the“ReceivingParty”),and …………………………………………………………….(operating under the trade name “A B C”),having its office at …………………………………………………………………………, (the “Disclosing Party”).
The Receiving Party hereto desires to participate in discussions regarding providing financial assistance in the form of various products from time to time to small and medium enterprises introduced to it by the Disclosing Party (the “Transaction”). During these discussions, Disclosing Party may share certain confidential and proprietary information with the Receiving Party. Therefore, in consideration of the mutual promises and covenants contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
- Definition of Confidential Information.
- (a) For purposes of this Agreement, “Confidential Information” means any data or information that is proprietary to the Disclosing Party and not generally known to the public, whether in tangible or intangible form, in whatever medium provided, whether unmodified or modified by Receiving Party or its Representatives (as defined herein), whenever and however disclosed, including, but not limited to: (i) any marketing strategies, plans, financial information, projections, operations, sales estimates, business plans and performance results relating to the past, present or future business activities of the Disclosing Party, its affiliates, subsidiaries and affiliated companies; (ii) plans for products or services, and customer or supplier lists; (iii) any scientific or technical information, invention, design, process, procedure, formula, improvement, technology or method; (iv) any concepts, reports, data, know-how, works-in-progress, designs, development tools, specifications, computer software, source code, object code, flow charts, databases, inventions, information and trade secrets; (v) any other information that should reasonably be recognized as confidential information of the Disclosing Party; and (vi) any information generated by the Receiving Party or by its Representatives that contains, reflects, or is derived from any of the foregoing. Confidential Information need not be novel, unique, patentable, copyrightable or constitute a trade secret in order to be designated Confidential Information. The Receiving Party acknowledges that the Confidential Information is proprietary to the Disclosing Party, has been developed and obtained through great efforts by the Disclosing Party and that Disclosing Party regards all of its Confidential Information as trade secrets.
(b) Notwithstanding anything in the foregoing to the contrary, Confidential Information shall not include information which: a) was lawfully possessed, as evidenced by the Receiving Party’s records, by the Receiving Party prior to receiving the Confidential Information from the Disclosing Party; (b) becomes rightfully known by the Receiving Party from a third-party source not under an obligation to the Disclosing Party to maintain confidentiality; (c) is generally known by the public through no fault of or failure to act by the Receiving Party inconsistent with its obligations under this Agreement; (d) is required to be disclosed in a judicial or administrative proceeding, or is otherwise requested or required to be disclosed by law or regulation, although the requirements of paragraph 4 hereof shall apply prior to any disclosure being made; and (e) is or has been independently developed by employees, consultants or agents of the Receiving Party without violation of the terms of this Agreement, as evidenced by the Receiving Party’s records, and without reference or access to any Confidential Information.
- Disclosure of Confidential Information.
From time to time, the Disclosing Party may disclose Confidential Information to the Receiving Party. The Receiving Party will: (a) limit disclosure of any Confidential Information to its directors, officers, employees, agents or representatives (collectively “Representatives”) who have a need to know such Confidential Information in connection with the Transaction, and only for that purpose; (b) advise its Representatives of the proprietary nature of the Confidential Information and of the obligations set forth in this Agreement, require such Representatives to be bound by written confidentiality restrictions no less stringent than those contained herein, and assume full liability for acts or omissions by its Representatives that are inconsistent with its obligations under this Agreement; (c) keep all Confidential Information strictly confidential by using a reasonable degree of care, but not less than the degree of care used by it in safeguarding its own confidential information; and (d) not disclose any Confidential Information received by it to any third parties (except as otherwise provided for herein).
- Use of Confidential Information.
The Receiving Party agrees to use the Confidential Information solely in connection with the Transaction and not for any purpose other than as authorized by this Agreement without the prior written consent of an authorized representative of the Disclosing Party. No other right or license, whether expressed or implied, in the Confidential Information is granted to the Receiving Party hereunder. Title to the Confidential Information will be and remain solely in the Disclosing Party. All use of the Confidential Information by the Receiving Party shall be for the benefit of the Disclosing Party and any modifications and improvements thereof by the Receiving Party shall be the sole property of the Disclosing Party.
- Compelled Disclosure of Confidential Information.
Notwithstanding anything in the foregoing to the contrary, the Receiving Party may disclose Confidential Information pursuant to any governmental, judicial, or administrative order, subpoena, discovery request, regulatory request or similar method, provided that the Receiving Party promptly notifies, to the extent practicable, the Disclosing Party in writing of such demand for disclosure so that the Disclosing Party, at its sole expense, may seek to make such disclosure subject to a protective order or other appropriate remedy to preserve the confidentiality of the Confidential Information; provided that the Receiving Party will disclose only that portion of the requested Confidential Information that, in the written opinion of its legal counsel, it is required to disclose. The Receiving Party agrees that it shall not oppose and shall cooperate with efforts by, to the extent practicable, the Disclosing Party with respect to any such request for a protective order or other relief. Notwithstanding the foregoing, if the Disclosing Party is unable to obtain or does not seek a protective order and the Receiving Party is legally requested or required to disclose such Confidential Information, disclosure of such Confidential Information may be made without liability.
This Agreement shall remain in effect upto March 31,2017 (subject to a one year extension if the parties are still discussing and considering the Transaction at the end of the second year). Notwithstanding the foregoing, the Receiving Party’s duty to hold in confidence Confidential Information that was disclosed during term shall remain in effect indefinitely.
The Receiving Party acknowledge that the Confidential Information to be disclosed hereunder is of a unique and valuable character, and that the unauthorized dissemination of the Confidential Information would destroy or diminish the value of such information. The damages to Disclosing Party that would result from the unauthorized dissemination of the Confidential Information would be impossible to calculate. Therefore, the Receiving Party hereby agrees that the Disclosing Party shall be entitled to injunctive relief preventing the dissemination of any Confidential Information in violation of the terms hereof. Such injunctive relief shall be in addition to any other remedies available hereunder, whether at law or in equity. The Disclosing Party shall be entitled to recover its costs and fees, including reasonable attorneys’ fees, incurred in obtaining any such relief. Further, in the event of litigation relating to this Agreement, the Disclosing Party shall be entitled to recover its reasonable attorney’s fees and expenses.
- Return of Confidential Information.
The Receiving Party shall immediately return and redeliver to the Disclosing Party all tangible material embodying any Confidential Information provided hereunder and all notes, summaries, memoranda, drawings, manuals, records, excerpts or derivative information deriving therefrom, and all other documents or materials (“Notes”) (and all copies of any of the foregoing, including “copies” that have been converted to computerized media in the form of image, data, word processing, or other types of files either manually or by image capture) based on or including any Confidential Information, in whatever form of storage or retrieval, upon the earlier of: (i) the completion or termination of the dealings between the parties contemplated hereunder; (ii) the termination of this Agreement; or (iii) at such time as the Disclosing Party may so request; provided however that the Receiving Party may retain such of its documents as is necessary to enable it to comply with its reasonable document retention policies. Alternatively, the Receiving Party, with the written consent of the Disclosing Party may (or in the case of Notes, at the Receiving Party’s option) immediately destroy any of the foregoing embodying Confidential Information (or the reasonably nonrecoverable data erasure of computerized data) and, upon request, certify in writing such destruction by an authorized officer of the Receiving Party supervising the destruction).
- Notice of Breach.
The Receiving Party shall notify the Disclosing Party immediately upon discovery of, or suspicion of, (1) any unauthorized use or disclosure of Confidential Information by the Receiving Party or its Representatives; or (2) any actions by the Receiving Party or its Representatives inconsistent with their respective obligations under this Agreement, and the Receiving Party shall cooperate with any and all efforts of the Disclosing Party to help the Disclosing Party regain possession of Confidential Information and prevent its further unauthorized use.
- No Binding Agreement for Transaction.
The parties agree that neither party will be under any legal obligation of any kind whatsoever with respect to a Transaction by virtue of this Agreement, except for the matters specifically agreed to herein. The parties further acknowledge and agree that they each reserve the right, in their sole and absolute discretion, to reject any and all proposals and to terminate discussions and negotiations with respect to a Transaction at any time. This Agreement does not create a joint venture or partnership between the parties. If a Transaction goes forward, the non-disclosure provisions of any applicable transaction documents entered into between the parties (or their respective affiliates) for the Transaction shall supersede this Agreement. In the event such provision is not provided for in said transaction documents, this Agreement shall control.
NO WARRANTIES ARE MADE BY EITHER PARTY UNDER THIS AGREEMENT WHATSOEVER. The parties acknowledge that although they shall each endeavor to include in the Confidential Information all information that they each believe relevant for the purpose of the evaluation of a Transaction, the parties understand that no representation or warranty as to the accuracy or completeness of the Confidential Information is being made by the Disclosing Party. Further, neither party is under any obligation under this Agreement to disclose any Confidential Information it chooses not to disclose. Neither party hereto shall have any liability to the other party nor to the other party’s Representatives resulting from any use of the Confidential Information except with respect to disclosure of such Confidential Information in violation of this Agreement.
(a) This Agreement constitutes the entire understanding between the parties and supersedes any and all prior or contemporaneous understandings and agreements, whether oral or written, between the parties, with respect to the subject matter hereof. This Agreement can only be modified by a written amendment signed by both parties.
(b) The validity, construction and performance of this Agreement shall be governed and construed in accordance with the laws of India. The courts at New Delhi shall have sole and exclusive jurisdiction over any disputes arising under, or in any way connected with or related to, the terms of this Agreement.
(c) Any failure by either party to enforce the other party’s strict performance of any provision of this Agreement will not constitute a waiver of its right to subsequently enforce such provision or any other provision of this Agreement.
(d) Although the restrictions contained in this Agreement are considered by the parties to be reasonable for the purpose of protecting the Confidential Information, if any such restriction is found by a court of competent jurisdiction to be unenforceable, such provision will be modified, rewritten or interpreted to include as much of its nature and scope as will render it enforceable. If it cannot be so modified, rewritten or interpreted to be enforceable in any respect, it will not be given effect, and the remainder of the Agreement will be enforced as if such provision was not included.
(e) Any notices or communications required or permitted to be given hereunder may be delivered by hand, deposited with a nationally recognized overnight carrier, electronic-mail, or mailed by certified mail, return receipt requested, postage prepaid, in each case, to the address of the other party first indicated above (or such other addressee as may be furnished by a party in accordance with this paragraph). All such notices or communications shall be deemed to have been given and received: (a) in the case of personal delivery or electronic-mail, on the date of such delivery, (b) in the case of delivery by a nationally recognized overnight carrier, on the third business day following dispatch, and (c) in the case of mailing, on the seventh business day following such mailing.
(f) This Agreement is personal in nature, and neither party may directly or indirectly assign or transfer it by operation of law or otherwise without the prior written consent of the other party, which consent will not be unreasonably withheld. All obligations contained in this Agreement shall extend to and be binding upon the parties to this Agreement and their respective successors, permitted assigns and designees.
(g) The receipt of Confidential Information pursuant to this Agreement will not prevent or in any way limit either party from: (i) developing, making or marketing products or services that are or may be competitive with the products or services of the other; or (ii) providing products or services to others who compete with the other.
(h) Paragraph headings used in this Agreement are for reference only and shall not be used or relied upon in the interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
ABCLtd., XYZ.. Pvt. Ltd.
EFG By _____
Vice President Name:
“In The High Court Of Judicature At vs M/S.Secan Invescast (India) on 1 February, 2013 Madras High Court”
“Discussion:- The appellant is a leading global OEM and has been supplying cement plant machinery, spare parts and services to various customers in India. They have developed the respondent as a vendor for manufacturing heat resistant castings such as dip tubes/casted central tubes, etc. They have also furnished several proprietary information and material belonging to the appellant, such as technical and manufacturing drawings, material specifications and documents containing knowhow, to the respondent. To protect confidentiality, a Non-Disclosure Agreement dated 22.05.2006 was entered into by the appellant with the respondent. Under Clauses 1 to 4 of the agreement, the respondent agreed that all datas and drawings will be treated as confidential information and would not be disclosed or made available by them directly or indirectly to any third parties without prior written consent of the appellant. Clauses 1 to 4 are non-disclosure agreement clauses.”
The above case says that the appellant shared important information of his trade with the respondent and told him not to disclose such information and they entered into a contract called non-disclosure agreement. The respondent also promised not to disclose such information to any other party but he afterwards violated the terms and conditions of the agreement and then he was pulled to the court for this reason.
“Manali Petrochemicals Limited vs Mr.Kennadi Paulchamy on 3 August, 2018 Madras High Court”
“The petitioner is a company registered under the Companies Act and it offered employment to the respondent as Manager, Research, Development and Quality Assurance (RDQA). Such kind of employees are required to undertake that they would not take up employment directly or indirectly with any competitor for a period of two years after cessation of employment. They would also for a period of two years from the date of cessation of their employment either directly or indirectly or through affiliates solicit or employ any of the serving officers of the petitioner without obtaining prior written consent. The respondent was offered the appointment as Manager on 15.10.2014 and he was also asked to execute a Secrecy Agreement with the petitioner. As the respondent was a person deployed in R and D and QA, he was expected to keep all information, disclosed or made known to him or which he may come across, as secret and confidential and should not disclose the same to any third party. The respondent was also provided with the copy of the Confidentiality and Non-disclosure Agreement, which was signed on 30.10.2014.”
“ It is stated that as per the said agreement, for any violation or breaking the clauses regarding non-solicitation, the respondent would become liable to the petitioner and compensate for the loss sustained, in addition to the right of recovery of liquidated damages not exceeding Rs.10,00,000/-. It is stated further that the respondent was given exposure to various systems procedures, know-how, techniques and technology of the petitioner, including R & D. Hence, yet another agreement containing similar terms and conditions of the non-disclosure agreement was entered into on 01.06.2015 only modifying liquidated damages clause from Rs.10,00,000/- to Rs.50,00,000/-. The said agreement also contained a similar arbitration clause in Clause 10.”
“ It is stated that when clause 10 of the confidential and non-disclosure agreement provides for appointment of a sole arbitrator and the liability of the respondent to pay the petitioner a sum of Rs.50,00,000/- as liquidated damages for the breach of the confidential and non-disclosure agreement dated 30.10.2014 as modified by the agreement dated 01.06.2015, is the arbitrable dispute, the above petition has been filed seeking appointment of a sole Arbitrator.”
The above case says that the respondent was appointed as a manager of the petitioner’s company. The petitioner shared some important information with the respondent and urged him not to disclose it and made non-disclosure agreement with the respondent but later on, the respondent has violated the terms and conditions of the agreement. Thereby he became liable to pay damages to the petitioner.
The above body explains the Non-Disclosure Agreement, Procedures to make Non-Disclosure agreement along with case laws and so on. An NDA is necessary for any company or other institutions to keep their confidential information undisclosed and this agreement binds the contracting parties not to disclose such information mentioned in the agreement otherwise they have to pay for it. It is better to make the Non-Disclosure Agreement to safeguard confidential information of the company or any institutions. So, it is better to take advice from a lawyer to deal with these types of matters.