Regulations on the legality and enforceability of Electronic Signatures: India

Which laws govern electronic signatures in India?

There are four relevant laws and regulations governing the usage of electronic signatures in India: the Information Technology Act 2000 (“ITA”), the Indian Contract Act of 1872 (“ICA”), the Electronic Signature or Electronic Authentication Technique and Procedure Rules, 2015 (“ESEATPR”), and the Indian Stamp Act, 1899. According to these laws, (i) electronic signatures are recognized in India as official signatures; (ii) what documents or transactions cannot be entered into electronically; (iii) what conditions all contracts must meet, including contracts using electronic signatures that do not meet the ITA’s formal requirements; and (iv) why stamp duty should be taken into consideration when entering into an electronic transaction.

The ITA states that a contract that meets the essential elements of a valid contract under the ICA cannot be denied enforceability merely because it was conducted electronically.

According to Section 10 of the ICA, a valid contract includes the following elements:

• Competent parties enter into contracts;
• The parties enter into it of their own free will (valid proposal and acceptance); Parties are required to consider each other’s interests;
• Acts that are prohibited by law are not required to be performed.

Indian law does not require a signature for a contract between private parties; the only express requirements for validity are those listed above.

Find out what qualifies as an electronic signature in India-

A high-level overview of the ITA is that it establishes when a “digital signature” is treated the same way as a handwritten signature. Also, under the ITA, a “digital signature” is an “electronic signature.” Specific techniques are required for creating a valid “electronic signature” in the Second Schedule of the ITA.

Electronic signatures are defined as the “authentication of electronic records by a subscriber using the electronic techniques specified in the Second Schedule, including digital signatures.” A digital signature is defined in the ITA as the “authentication of any electronic record by a subscriber by means of an electronic method or procedure in compliance with section 3” (discussed below).

Except for a few situations where governmental authorities are involved in India, using an ITA electronic signature is not legally required when parties enter into agreements. However, electronic signatures that do not meet the criteria of an ITA electronic signature may still be valid – although they do not possess the same legal standing as a handwritten version and may require additional proof regarding proving their validity.

• 1. Integrating a unique identification number with an electronic Know-Your-Customer service (eKYC) to provide reliable electronic signatures.

An “electronic signature” must meet two criteria to be validly recognized as an ITA Electronic Signature: (i) it must be “reliable,” and (ii) it must use an authentication technique specified in the Second Schedule.

Indian law considers an electronic signature reliable if:

• In the context in which they are employed, the signature creation data or authentication data are linked to the signatory or to the authenticator and no other party (i.e., the signature must be unique to the signatory);
• At the time of signing, the signature creation data or authentication data were under the control of the signatory or authenticator and no one else;
• It is detectable if an electronic signature has been altered after it has been attached;
• It is possible to detect any alteration of the information after an electronic signature has authenticated it;
• A record of the steps taken during the signing process should be kept; and
• Under the IT Act, signer certificates must be allocated by a Certifying Authority (CA) identified by the Controller of Certifying Authorities.

As described in the ESEATPR, electronic signatures or records can be authenticated using electronic authentication techniques. It is possible to authenticate an “electronic signature” using either of the following methods, according to the ESEATPR:

• Aadhaar e-KYC services; or
• Provide a third-party service by generating subscriber’s key pairs, storing key pairs on hardware security modules, and creating digital signatures, provided the trusted third party providing such services is one of the licensed Certifying Authorities.

• 2. “Digital signatures” that are generated by an “asymmetric crypto-system and hash function”

Licensed Certifying Authorities issue digital signatures to users.

How can electronic signatures be used?

There is no requirement for a signature on a contract between private parties. Further, except as provided below, India does not preclude documents from being executed electronically, but it is imperative to consider whether stamp duty is applicable before conducting any transaction electronically.

Are electronic signatures prohibited for any transactions?

Indian Stamp Act

The Indian Stamp Act, or the respective stamp act applicable to a state, necessitates that specified instruments are stamped before or at the time of execution. However, this Act does not address electronic records or any law in India. To rectify this, certain states such as Maharashtra, Gujarat, Karnataka, Delhi, Uttar Pradesh, and Rajasthan have amended their stamp acts to include “electronic records,” defined under the ITA, in the definition of an ‘instrument,’ thereby applying the requirement of stamping them too.

In India, instruments not adequately stamped are inadmissible as evidence and may be subject to penalties for evading stamp duty payments. Therefore, if the relevant document requires stamp duty to be paid, it should be carefully considered whether it can be executed electronically and have the appropriate stamp tax paid.

Prohibited documents:

Documents or transactions that cannot be signed electronically include:

• Power-of-attorney;
• Trust deeds;
• Instruments other than checks that can be negotiated, such as promissory notes or bills of exchange;
• A contract for the sale or conveyance of immovable property or any interest therein.
• The will and any other testamentary disposition by whatever name it may be called;

In addition, notarized documents must be signed physically before the Notary Public, and documents requiring registration must be physically signed before the Registrar.

Is consent required for electronic signatures in India?

Electronic signatures are not subject to any formal consent requirements in India.

What factors led to the enforcement of digital signatures in India?

When considering electronic signatures that are not acknowledged under the ITA, several factors should be taken into account. These include: (a) the agreement must be in accordance with applicable law; (b) the terms of the agreement should be fair; (c) an identifiable user must give a full and unqualified acceptance; (d) after applying the electronic signature, the agreement should become tamper-proof; and (e) a log of actions that occurred during the signing process should be kept and made tamper-proof also.

*Disclaimer: This page is intended to provide general information without any risks associated with legal advice. Though this page may contain some general legal information, it should not be used as an alternative for legal advice in your jurisdiction. You should always consult with an attorney or other professional before making any decisions on your own. MSB Docs provides this material “as-is,” and they disclaim any responsibility regarding its use. MSB Docs makes no representation or warranty of any kind, including guarantees or warranties of merchantability, fitness for a particular purpose, or accuracy of this material.