Lawsikho Blog

A well-drafted NDA is important, but in matters of trade secrets, it becomes instrumental. In this article, I will tell you the types, mistakes to avoid, and I will also show you how to draft one. If you are serious about protecting your business, using an NDA is one of the first and most essential steps.

Introduction

In our earlier article on the Lifecycle of a Trade Secret, we saw how Emmanuel started his business and the steps he took to protect his business. One of the first tools that he used? A Non-Disclosure Agreement (NDA).

When Emmanuel’s chocolate business exploded into popularity, it was not just the customers who noticed. Investors began knocking, food bloggers wanted behind-the-scenes content, and consultants offered to help scale production. His inbox was overflowing, and so was his calendar. Everyone wanted a piece of what he had built.

What Emmanuel had was not just a kitchen full of ingredients. It was a system. A recipe that took years and years to perfect. A process that used a rare combination of locally sourced ingredients and carefully calibrated tempering temperatures. That was the magic. That was the edge.

We briefly touched upon NDAs during Emmanuel’s journey, but let us understand them. When you are running a business, whether you are launching a SaaS tool, building a designer label, or perfecting small-batch chocolate, the one document that can guard your secret sauce from walking out the door is a well-drafted Non-Disclosure Agreement (NDA).

This is not just about having some legal paperwork. It is about understanding what to include, what mistakes to avoid, and how to make sure your NDA is actually enforceable under Indian law.

What is an NDA, and why do you need one?

A Non-Disclosure Agreement (NDA) is a legal contract between two or more parties where one or all agree not to disclose certain confidential information shared during the course of a business relationship.

At its heart, an NDA is about trust, but backed by enforceable consequences. It turns an informal promise like “I will not tell anyone” into a binding legal obligation: “If you disclose this, I can take you to court.”

When should you use an NDA?

If you are running a business, big or small, you should think of NDAs not as a last resort, but as a default practice in several situations:

1. Hiring employees

Emmanuel started hiring pastry chefs to keep up with orders. But how would he ensure that they would not leave and open their own chocolate bar using his recipes?

An employee NDA, ideally integrated into the employment agreement, could prohibit them from disclosing the recipe, prevent them from sharing internal SOPs and restrict post-employment misuse.

2. Engaging consultants or freelancers

Just like the food consultant Emmanuel met, external advisors often get access to business-critical information. An NDA ensures that what they learn or see stays with them, even after the relationship ends.

3. Collaborating with other businesses

If Emmanuel wanted to license his recipe to a boutique hotel chain or jointly develop a new product line with another chocolatier, he would likely need to share some trade secrets. A mutual NDA is critical before exploring such collaborations.

4. Fundraising or investor pitches

Pitch decks, customer data, projections, sourcing contracts- these are confidential. While many VCs will not sign NDAs during early fundraising (and it is common practice not to insist), it becomes relevant in due diligence phases, especially with strategic investors.

5. Vendor and manufacturing relationships

Emmanuel partnered with a local cocoa butter supplier. To ensure that they did not reveal his usage patterns or disclose the custom blend ratios to competitors, a vendor NDA was essential.

Is an NDA enforceable in India?

Yes, but with some important caveats.

Under the Indian Contract Act, 1872, an NDA is valid and enforceable as long as it meets the basic elements of a contract:

1. Free consent of the parties
2. Lawful consideration
3. Lawful object
4. Not void under the provisions of the Contract Act, 1872

Additionally, in case of a breach, a party can approach the courts under The Specific Relief Act, 1963, for injunctions, civil suit for damages, and in some cases, even criminal proceedings under sections of the IPC, like section 405 (criminal breach of trust)

However, courts in India will not enforce overly broad or vague clauses. They expect precision, both in defining what is confidential and specifying how it should be handled.

Types of NDAs: Choose the right fit for your business

Not all NDAs are built the same. The kind of NDA you need depends on the nature of your relationship with the other party and whether one or both parties are disclosing confidential information.

Let us look at the three main types of NDAs and explore how Emmanuel’s chocolate empire might encounter each one.

Unilateral NDA

This is the most common kind; only one party shares confidential information, and the other agrees not to disclose or misuse it.

For instance, Emmanuel is hiring a packaging consultant to redesign his premium gift boxes. To do that, the consultant needs to know Emmanuel’s pricing structure, target markets, and seasonal product pipeline. Emmanuel is disclosing sensitive business info, but the consultant is not.

A unilateral NDA is perfect here. It protects Emmanuel’s disclosures without overcomplicating things.

Make sure the party receiving the information understands their obligations, including return or destruction of data, and restrictions on further sharing.

Mutual NDA (bilateral NDA)

Here, both parties are sharing confidential information, and both agree to protect what they learn from each other.

Suppose Emmanuel is in talks with a small organic cocoa farm about jointly developing a signature chocolate bar. Emmanuel shares his recipe framework; the farm shares their proprietary fermentation process.

Both sides are sharing trade secrets. So a mutual NDA makes sense.

Do not use a mutual NDA “just in case.” If only one party is disclosing, keep it unilateral. Mutual NDAs should be used intentionally, when both parties are truly opening up.

Multilateral NDA

This type involves three or more parties, where at least one discloses confidential information, and all agree to protect it.

If Emmanuel is working with a brand strategist, an event company, and a high-end restaurant chain to co-host a luxury chocolate-tasting experience. There are shared ideas, designs, and strategies being floated.

Instead of multiple bilateral NDAs between each pair, one multilateral NDA covers all parties. It simplifies the paperwork and creates a unified confidentiality structure.

But be careful because these agreements need to be drafted precisely, as obligations vary across parties. It is also harder to negotiate and enforce multilateral terms in Indian courts unless clearly defined.

Common mistakes in drafting NDAs 

The first time Emmanuel used an NDA, he downloaded a random template online, changed the names, and sent it off. It looked fine on the surface, but when things went south, he realised just how many things he had overlooked.

Here are the top mistakes to avoid.

Using generic or incomplete definitions of confidential information

Emmanuel’s first NDA had a one-liner:

All business-related information is confidential.

Sounds okay, right? Not quite. When the consultant replicated a part of his process and claimed she did not think “oven temperature profiles” were part of the “business info,” Emmanuel had no comeback.

Be specific and tailored. List out examples, recipes, process flows, batch codes, and marketing strategies. The clearer your scope, the stronger your protection.

Forgetting to include a non-use clause

It is not enough to say “do not disclose.” You must also say:

Do not use this information for any purpose outside of the relationship.

Without this, Emmanuel had no grounds when someone used his recipe tweaks internally, without technically “disclosing” it to the world.

Overly broad or unenforceable clauses

Emmanuel once insisted that the NDA protect “any and all information” shared for 25 years. His lawyer gently pointed out that Indian courts might strike down or read down such excessive terms.

NDAs must strike a balance between robust and reasonable. Courts will refuse to enforce overly vague, harsh, or one-sided terms, especially if they appear oppressive to the receiving party.

Ignoring Indian contract nuances

Many online templates are US-centric. Emmanuel’s first NDA included references to the “Delaware courts” and “punitive damages”, not applicable in India.

Make sure your NDA aligns with Indian contract law:

• Clearly define consideration (if necessary)
• Avoid unlawful restraints under section 27 of the Indian Contract Act
• Keep in mind that non-compete clauses post-termination are largely unenforceable in India unless protecting trade secrets or goodwill

Not defining the consequences of breach

The original NDA Emmanuel used did not spell out what would happen if the consultant leaked information. When he tried to sue, there was no mention of injunction, damages, or legal recourse.

Always include a remedies clause, mentioning that breach will entitle the disclosing party to:

• Immediate injunctive relief (to stop the leak)
• Specific performance
• Legal costs and damages

Forgetting to sign and date the agreement properly

This one is simple, but often fatal. Emmanuel once shared a recipe draft with a partner before the NDA was signed. That partner later argued that they were never legally bound.

Never disclose a single byte of sensitive information until the NDA is signed, dated, and preferably on letterhead with witness signatures if needed. Digital signatures (under the Indian IT Act) are valid too, but verify authenticity.

Not updating or amending the NDA as relationships evolve

Initially, Emmanuel had NDAs only for consultants. But as his business grew, he onboarded interns, marketing partners, photographers, and software vendors—all of whom had access to sensitive information.

Each time, the NDA had to be adapted to the scope of the relationship. Do not fall into the trap of using a one-size-fits-all NDA for every use case.

Emmanuel eventually created separate NDA templates for:

• Employees (as annexures to appointment letters)
• Freelancers and consultants (project-specific)
• Potential collaborators (with mutual confidentiality obligations)

He also kept one master NDA reviewed annually by his lawyer, so every new interaction started from a position of protection.

Non-Disclosure Agreement (NDA)

Now that we know why NDA matters and what to avoid, let us draft one. This Agreement is tailored for Indian businesses under the Indian Contract Act, 1872.

Introduction: Parties and purpose

Before getting into legal language, your NDA should clearly state who is involved and why confidential information is being exchanged. This part identifies the “Disclosing Party” (the one sharing the confidential info) and the “Receiving Party” (the one receiving it). It also lays down the business purpose for which the NDA is signed.

Preamble

This Non-Disclosure Agreement (“Agreement”) is made and entered into on this ____ day of ____, 2025, by and between:

Emmanuel Chocolatier Pvt. Ltd. (“Disclosing Party”), a company incorporated under the Companies Act, 2013, having its registered office at [Insert Address], India, which specialises in artisanal chocolate production using proprietary recipes and techniques; (hereinafter referred to as “Disclosing Party” which expression shall unless repugnant to the context or meaning hereof be deemed to mean and include its successors and assigns);

AND

[Insert Name of Receiving Party] (“Receiving Party”), a [insert legal nature of entity], having its registered office at [Insert Address], India, which is exploring a potential collaboration with Emmanuel Chocolatier Pvt. Ltd. for business expansion (hereinafter referred to as “Receiving Party” which expression shall unless repugnant to the context or meaning hereof be deemed to mean and include its successors and assigns).

Recitals 

Next part would be the recitals of the agreement where the background information is given, the intent behind this particular NDA. 

WHEREAS, the Disclosing Party has developed unique formulations, tempering techniques, and ingredient sourcing strategies that contribute to the superior quality and distinctive taste of its chocolates;

WHEREAS, the Receiving Party [enter the details of the receiving party] is interested in exploring a potential business collaboration with the Disclosing Party to manufacture, distribute, or co-brand its chocolate products;

WHEREAS, in view of the aforesaid, the Disclosing Party has agreed to disclose certain confidential information concerning the business which it considers necessary and required by the Receiving Party for the said purpose.

The intention of the Disclosing Party is to maintain total confidentiality about all its information, which it may disclose to the Receiving Party.

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties agree as follows:

Definition of confidential information

This clause precisely defines what information is protected. It should cover written, oral, electronic, and visual disclosures, and should also exclude public or already-known information.

1. Definition of Confidential Information

1.1. Confidential Information: Confidential Information means all non-public, proprietary, or sensitive information disclosed by the Disclosing Party to the Receiving Party, whether orally, in writing, electronically, or otherwise, including but not limited to recipes and ingredient formulations for chocolates, manufacturing processes, including tempering, molding, and storage techniques, business strategies, supplier relationships, pricing models, and marketing plans; product designs, packaging concepts, and future development plans and any other information expressly marked or identified as “Confidential.”

Exclusions

So, not everything can be protected. This clause identifies categories of information that are not confidential. 

1.2 Exclusions: Confidential Information does not include information that is or becomes publicly known without breach of this Agreement, is lawfully known to the Receiving Party prior to disclosure, is rightfully obtained by the Receiving Party from a third party without breach of confidentiality, is independently developed by the Receiving Party without reference to the Disclosing Party’s information.

Confidentiality obligations

This is the main bit It specifies what the Receiving Party must do (or avoid doing) to protect the confidential info.

2. Obligations of the Receiving Party

2.1 This covenant shall not be binding on the Recieving Party and shall not apply to information, technical or other data or know-how which (1) is already in public domain; (2) is rightfully received from a third party without and not in breach of any right of confidentiality; (3) is already known to the Receiving Party at the time of disclosure without an obligation of confidentiality; (4) is produced in compliance with the applicable law or court order of before any statutory body or Authority in compliance with the provisions of law, provided that the Receiving Party shall give the Disclosing Party notice in writing of the nature of disclosure made and of the applicable provisions of law.

2.2 The Receiving Party shall not disclose the Confidential Information to any third party without prior written consent, except to employees, agents, or consultants who need access for the Purpose and are bound by confidentiality obligations at least as stringent as those in this Agreement.

2.3 The Receiving Party shall apply the same degree of care, but no less than a reasonable degree of care, to protect the confidentiality of the information.

2.4 The Receiving Party shall not reproduce, copy, reverse engineer, or derive the disclosed information except for evaluation under supervised access.

2.5 Upon request or termination, the Receiving Party shall return or destroy all Confidential Information and confirm such destruction in writing.

Non-compete clause

The next part is the non-compete and non-solicitation, wherein you need to make clear that they cannot make anything similar to your product.

3. Non-Compete and Non-Solicitation

3.1 Non-Compete: For a period of three (3) years from the Effective Date, the Receiving Party shall not develop, produce, or distribute premium artisanal chocolates that imitate or are based on Emmanuel’s proprietary products.

3.2 Non-Solicitation: The Receiving Party shall not solicit or attempt to engage the Disclosing Party’s suppliers, staff, or collaborators for a competing chocolate business.

Ownership

You need to mention clearly who holds the rights.

4. Ownership and Title

4.1 The Disclosing Party retains all rights and interests in its Confidential Information, including improvements or enhancements.

4.2 No license or ownership is granted to the Receiving Party, except for the limited right to use the information for evaluation purposes.

4.3 This clause shall survive termination or expiration of this Agreement.

Term and survival 

NDAs are usually valid for a few years, but obligations may continue after the agreement ends.

5. Evaluation Timeline

5.1 Access: The Receiving Party shall be given access to Emmanuel’s manufacturing process and chocolate samples for a limited period of three (3) months, strictly for evaluation under supervision.

5.2 Feedback: The Receiving Party shall complete its assessment and provide feedback within this period. Extensions must be agreed in writing.

6. Term of Confidentiality

The obligations of confidentiality shall remain in effect for a period of five (5) years from the date of disclosure.

Breach, termination and consequences

Without this, an NDA is weak. This clause gives you recourse if things go wrong.

7. Breach, termination and consequences

7.1. In the event of a breach of any of the terms and conditions recorded herein by either party, the aggrieved party shall issue a written notice to the defaulting party, requiring the breach to be remedied within a period of 30 days from the date of receipt of such notice. If the defaulting party fails to remedy the breach within the specified period, this Agreement shall stand ipso facto terminated without any further notice. On termination of this Agreement, the rights and obligations of the respective parties shall cease. Such termination shall be without prejudice to any other rights or remedies available to the aggrieved party under law, including but not limited to the right to enforce confidentiality provisions.

7.2. Upon the termination or prior termination of this Agreement, the Receiving Party shall return to the Disclosing Party all documents and information received from the Disclosing Party during the term of this Agreement, without retaining any copies in any form. 

7.3. The parties acknowledge and agree that the business and financial information disclosed by the Disclosing Party to the Receiving Party under this Agreement is of a special, unique, and extraordinary nature. Any actual or threatened breach of the confidentiality provisions or other key obligations of this Agreement would result in irreparable harm, loss, and injury to the Disclosing Party. Accordingly, the Disclosing Party shall be entitled to seek immediate injunctive relief to prevent or restrain any such breach, in addition to any other remedies available at law or in equity.

7.4. Immediate termination is allowed in case of material breach, insolvency, or unauthorised use.

Miscellaneous clauses

These are standard but important clauses often missed in NDAs.

8. Miscellaneous

8.1. This agreement represents the entire understanding and agreement of the parties, and supersedes all prior communications, agreements, and understandings relating to the subject matter thereof. The provisions of this agreement shall not be modified, amended, or waived except by a written instrument, duly executed by both parties. 

8.2. In the event, if any provision or portion of this agreement is determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this agreement shall remain valid and binding on the parties hereto, and shall remain in full force and effect to the extent permissible by the law.

8.3. Assignment: This Agreement shall not be assigned by either Party without the prior written consent of the other.

Dispute resolution

Including an arbitration clause in your NDA gives both parties a private and quicker route to resolve disputes, rather than going through the regular court system. This is particularly helpful if you are sharing sensitive information and want to avoid the publicity of litigation.

9. Dispute resolution

9.1. In the event of any dispute or difference arising out of or in connection with this Agreement, including any question regarding its existence, validity, or termination, the same shall be referred to and finally resolved by arbitration in accordance with the Arbitration and Conciliation Act, 1996 (as amended).

9.2 The arbitration shall be conducted by a sole arbitrator mutually appointed by the Parties. The seat and venue of arbitration shall be [City], India. The language of arbitration shall be English. The arbitral award shall be final and binding on the Parties.

Signatures

This is the final part of the agreement wherein you need to sign and make sure the signatures and all the details given are proper.

10. Signatures

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above.

For Emmanuel Chocolatier Pvt. Ltd.

Signature: _________________

Name: Emmanuel G

Title: Founder & Director

For [Receiving Party Name]

Signature: ______________

Name: _______________

Title: _________________

For Witnesses:

Signature 1: _______________

Name: ______________

Date: _____________________

Conclusion: Protecting what matters

In today’s competitive business environment, protecting your trade secrets is not just a legal formality; it is an essential part of safeguarding your innovation and maintaining your competitive edge. Just like Emmanuel’s chocolate business, which relied on a blend of passion and secrecy to stay ahead in the market, businesses across all industries must take deliberate steps to protect what makes them unique.

From the initial stages of creation and identification to legal protection, operational safeguards, and continuous monitoring, the lifecycle of a trade secret is one that demands attention, foresight, and ongoing diligence. NDAs, employee policies, and access control measures are not just documents, they are part of a larger strategy that ensures your secrets remain yours.

But perhaps the most important lesson from Emmanuel’s journey is that the protection of trade secrets is not static. It evolves with the business. As your business grows, so too should the systems you put in place to protect your proprietary information. This proactive approach not only safeguards your assets but also prepares you for any potential legal disputes that might arise.

Ultimately, the true value of a trade secret lies not only in the idea itself but in the actions you take to protect it. So, whether you are just starting or are well into your business journey, ask yourself: What secrets are you keeping safe?

By building robust frameworks for protection, you can ensure that your business does not just survive, but thrives on what makes it different and valuable.