LEGAL PROVISIONS GOVERNING E-SIGNATURE

Introduction

The evolution of technology has not only helped us in easing day to day things but also the way of executing documents. Electronic signatures and Electronic agreements have gained a lot of momentum with an increase in the demand for a modern and convenient mode of entering into binding transactions. Talking of e-Signatures, it is an electronically created signature utilized to ensure the veracity and legitimacy of the information. Through the Information of Technology Act, 2000 (hereinafter IT Act) India recognized the use of Electronic Signature. Thereafter rules like under Electronic Authentication Technique and Procedure Rules, 2015 (hereinafter ESEATPR) or Digital Signature (End Entity) Rules 2015 (hereinafter DSER) were notified by the Ministry of Electronics and Information Technology, Government of India

Difference between E-Signature and Digital Signature

For this article, we need to understand the basic difference between Electronic Signature and Digital Signature. The Information Technology Act acknowledges two forms of e-signs as having similar legal acceptance as that of traditional signatures.

These two are:
  • E-Signature which incorporate an Aadhar ID with an electronic Know-Your-Customer (eKYC) method
  • Digital Signatures which are created by 'asymmetric crypto-system and hash functioning'. Here, the subscriber is issued a certificate-based digital identity number, which is stored on a USB and is used to place a sign on the document.
E-Signature and Indian Government

Indian Government has greatly advocated for the use of digital technologies. After e-Signature got legal validity and was started getting considered as same as a physical signature, there have been various initiatives by the government to promote the use of e-Signature. Some of them are as follows:

In 2014, Technical Committee on Enabling Public Key Infrastructure in Payment System Applications recommended that Public Key Infrastructure (hereinafter PKI) based facility should be implemented across all banking transactions, be it companies or individual, but in a phased manner. Recommendations were given to ensure the genuineness of transactions. It was suggested that for doing away with cases like fraud, a two-stage verification process should be done and the use of PKI Infrastructure and Digital Keys in financial technology should be promoted.

In its recent report, the Steering Committee on Fintech Related Issues has highlighted the need to restructure the legal processes of the digital world. The committee suggested reforms like replacing wet signatures with digital alternatives as this would not only help in cutting costs but also a time in access to finance and repayment for financial service companies, businesses, etc. Committee has also recommended the Department of Legal Affairs to review all such legal processes which bears financial services and to amend existing laws to permit digital alternatives and make it compatible with electronic service delivery by financial services providers in cases like Power of attorney, trust deeds, Wills, Negotiable Instruments except cheques, Contract for sale of immovable property, etc.

In 2016, The Reserve Bank of India introduced Master Direction - Know Your Customer (KYC) Direction, 2016 (hereinafter KYC Direction) and allowed small payment and finance banks to use electronic authentication for verification. Moreover, it also permitted an OTP (One Time Password) based e-KYC procedure. After such provisions, several online payments bank like Kotak 811, Paytm Payments Bank, etc. started and is doing great. This direction was brought to establish an account-based relationship and for monitoring their transactions. Again, on May 29, 2019, RBI introduced several amendments to the KYC Direction in the backdrop of Aadhar Judgement where Hon'ble Supreme Court read down certain provisions of the Aadhar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 (hereinafter Aadhar Act), the Indian Telegraph Act, 1885 and the PML Rules.

Applicable Legislations

Indian law treats electronic signature as the equivalent to physical signatures. After the advent of schemes like Digital India, be it a contractual relationship among two parties or filling the eKYC forms, electronic signatures are being significantly used. Information Technology Act (hereinafter IT Act) legitimizes the use of Digital and Electronic Signature in a document. Section 2(zg) of IT Act defines subscribers as a person whose name is in the Electronic Signature Certificate. A digital signature is defined in Section 2(1)(p) of the IT Act read with section 3 and Digital Signature has also been recognized by the Government of India under Electronic Authentication Technique and Procedure Rules, 2015 (hereinafter ESEATPR). It was passed under the Second Schedule to the IT Act). Digital Signatures are also recognized under Digital Signature (End Entity) Rules 2015 (hereinafter DSER) which is passed under Section 87 of the IT Act. Various provisions of the Evidence Act also recognizes the evidentiary value of electronic signature in the court of law. That will be covered in later part of this article.

The Ministry of Electronics and Information Technology has prescribed a procedure for authentication through electronic signature under the Electronic Signature or ESEATPR and DSER. The ESEATPR prescribes the procedure of authenticating an electronic record by using Aadhaar e-KYC services. The DSER stipulates, among other things, the procedures for creating, authenticating and verifying digital signatures, and the standards of such digital and XML signatures. ESEATPR and DSER also prescribe the standards and procedures for authenticating electronic records.

Talking of contractual relation, according to Section 5 of IT Act, any document can be authenticated by digital signatures affixed in a manner as prescribed by the Central Government. Also, Section 10A of the IT Act validates contracts that are formed through electronic means. This provision was inserted through an amendment in the year 2008. It gives legal recognition to the formation of a contract by electronic means. However, the legal requirements for the formation of a valid contract are still there.

Since IT Act doesn't apply to the following transactions, E-Signatures are also not valid in such cases:
  1. Any Negotiable Instrument (except cheques) as defined under the Negotiable Instruments Act, 1882
  2. Power of Attorney as defined under Powers-of-Attorney Act 1882
  3. Trust under the Indian Trusts Act 1882
  4. Wills (including any other testamentary disposition, irrespective of the nomenclature) under Indian Succession Act, 1925
  5. The contract for sale or conveyance of Immovable property
Evidentiary value of Electronic Signature

To provide electronic records as a shred of admissible evidence in the court of law, it was also necessary to make appropriate amendments in the Indian Evidence Act. Section 3 of the Evidence Act provides defines 'Proof' as all documents including electronic records delivered for the review of the court.

Moreover, Section 47A provides for the relevancy of electronic signatures. It states that the opinion of the Certifying Authority which has issued the Electronic Signature is also relevant in concluding the electronic signature of any person.

Section 67A provides for proof of electronic signature. It states that if an electronic signature has been affixed to an electronic record, then it should be proved by the party alleging it that the electronic signature belongs to the same subscriber.

Section 85B talks about Presumptions to be taken by the court with regards to Electronic Signature. It states that the could presume that the signature of the subscriber is affixed to approve the electronic record. However, except in the case of Secure Electronic Signature, the Court shall not presume in itself the authenticity and integrity of electronic signature unless and until it's proved.