An NDA, short for non-disclosure agreement, is a formal document signed by both a disclosing party and a receiving party. The disclosing party is willing to reveal confidential information, while the receiving party is the entity receiving this information. Typically, such information exchange occurs during potential business transactions, commonly known as business deals. Additionally, NDAs are commonly executed between employers and employees, particularly in information technology companies where sensitive client information is involved. Employers often have incoming employees sign a formal NDA as part of their joining formalities. This agreement may be a separate document or include non-disclosure clauses within the employment agreement.

From a legal perspective, both approaches are considered valid in India. NDAs in India are executed on non-judicial stamp paper. However, even if not executed on stamp paper, the agreement remains legally enforceable. Any deficiency in stamp duty can be compensated by paying a penalty at the time of enforcement.

A typical employee non-disclosure clause in the information technology industry includes provisions such as:

1. The employee shall not directly or indirectly disclose any information related to the employer’s business, including customer details, pricing information, business plans, processes, source code, or other data. Both parties acknowledge the importance and confidentiality of such matters, and any breach is considered a material violation of the agreement. Additionally, employees are prohibited from discussing or revealing details of Board of Director meetings.

2. During employment, employees may develop work products within the scope of their consultancy or the company’s current or potential business lines. These work products, referred to as “Employer Proprietary Products,” may be created at the company’s premises, during work hours, or elsewhere. The clause covers work created individually or collaboratively with other employees or third parties.