How Important is a Non-disclosure Agreement (NDA)?

Last Updated at: Oct 05, 2020
Prudent ARC, one of Jet Airways’ prospective bidders, has signed a Non-Disclosure Agreement (NDA) with the Resolution Professional (RP). It is the first concrete move in obtaining a stake in the debt-linked airline.


It is crucial that employees of a company or those privy to the the business dealings of the corporation do not reveal confidential information relevant to the activities of the company. This is why a cautious business typically asks its business associates and employees to sign a non-disclosure agreement or NDA to keep its trade secrets and dealings secret.

What it is:
The NDA is an agreement between two parties in which one is the provider of the information that has to be protected and the other is the receiver of that protected information. It makes a legal obligation of the receiver of the protected information not to reveal it to anyone outside the contract. If the receiver discloses any information to someone for the purposes of contract, he must make sure that the third party should agree in writing to obtain information under terms as mentioned in the original agreement. In simple words, the third party receiving information must promise that he will not disclose the information provided to him to anyone else.

An NDA requires the party that receives the information to recognize that it is proprietary and confidential. In addition, the party should not exploit the information for his own benefit. If the receiving party discloses the protected information, documents, graphs, notes, charts, memoranda and other aspects representing the information will be given back to the disclosing party within a short span of time. While an NDA usually throws obligations on one party, it can be mutual; this means that it may compel both the parties not to reveal confidential information to anyone.

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Nature Of Information:
The NDA lays boundaries for the information that should not be disclosed. The sort of information coming within the boundaries includes patentable inventions, copyright material, processes, trade secrets, formulas, compounds, composition, blueprints, plans and so forth. It also includes the customer list of the company, prospective customers, company relationship and affairs, which are collectively called proprietary information. When it comes to employer- employee relationship, the NDA is bound with an incomplete agreement. So, the employee should not disclose the protected information not only during the employment period but also for a specific period after the termination of employment.

NDA may ensure that the information is safe and not leaked. But there can be some exceptions to this agreement. The receiver of the information may be obliged by the court to disclose it. Also, if the receiver already knows such information or receives the information through some other means, he may not be restricted by the NDA.

Registration Not Required:
An NDA need not be registered and will be admissable in court even unregistered. You could, however, register the NDA as per the Registration Act, 1908 by approaching the sub registrar office of your city or district. The charges for the registration and detailed rules for the same would vary from one state to another.