In business transactions, it is natural to deal with confidential information but how far is it protected without a confidentiality clause. Before knowing this aspect, it is important to know that including confidentiality clause in agreements or entering Non-disclosure agreement with all parties who are dealing with confidential information is prudent business practice when it comes to your initiative to protect your confidential information. And it you lack this practice; you are giving undue advantage to your opponent who takes unfair advantage of such information for his own personal advantage or any other purpose outside the purview of agreement. Having said this it is important to know that how far an agreement confidentiality is protected without a confidentiality clause.
Common laws of equity always try to protect against taking unfair advantage by contracting party. The High court of justice (Chancery Division) in Saltnam engineering case laid down that there was a breach of confidence if party uses a confidential matter beyond the limited purpose even if there is no contract between the parties. And this judgement has paved light for many other similar judgements upholding broad principles of equity and restricts the parties to take unfair advantage from confidential information. Article 39 of TRIPs agreement ensue the same spirit and prevents unfair disclosure of confidential information which is secret in nature and derives a commercial value due to its secrecy
From Indian perspective Information Technology Act 2000 have brought more clarity to the importance of confidential information and it is important to understand how law perceives the violation of such confidential information. Section 72 of the information technology Act deals with breach of confidentiality and privacy. As per this section, punishment extending up to two year or a penalty that may extend penalty up to of five lakh rupees can be imposed for breach of confidentiality. And section 72A was inserted to Information Technology Act 2000 in 2009 for protecting the breach of information of lawful contract. As per this section a punishment extending up to three years or penalty that may extend up to 5 lakhs can be imposed for breach of information of a lawful contract. Indirectly criminal breach of trust provision as per section 316 of BNS and 405 of IPC also address this issue from a larger perspective and controls dishonest misappropriation of property. Section 65 of information technology Act deals with tampering of source code also address this issue for coding related confidentiality. Hence adequate laws are available to protect the confidentiality of transactions but inserting confidentiality clause or entering confidentiality agreements between parties can only prioritize terms and conditions and manner in which confidentiality information should be handled between parties.