NORMAL SIGN AND E-SIGN, LEGAL IMPLICATIONS

Introduction

The Indian Contract Act does not expressly mention anything regarding signature on a contract. Therefore, a contract is valid and legally enforceable even without any signature on it. However, the signature of the parties can be seen as proof of their intention and consent to enter into the contract. Black's Law Dictionary defines signature (sign) as “A person’s name or mark written by that person or at the person’s direction; esp., one's handwritten name as one ordinarily writes it, as at the end of a letter or a check, to show that one has written it.

On the other hand, an electronic signature (e-sign) is defined by Black's Law Dictionary as "an electronic symbol, sound or process that is either attached to or logically associated with a document (such as contract or other record) and executed or adopted by a person with intent to sign a document." E-sign has been granted recognition through the Information and Technology Act which defines it as “authentication of any electronic record by a subscriber by means of the electronic technique specified in the Second Schedule and includes a digital signature. The legal implications of e-sign are as same as a traditional hand-written signature. A person putting e-sign on an agreement is liable in the eyes of law as much as he would have signed it with his hand. However, it cannot be denied that in the world of technology, the use of e-sign is more frequent and careless than the traditional hand-written sign. The logic is simple that people are not technically and legally sound enough to understand the legal implications of putting e-sign on an agreement. Therefore, this article tries to carve out the legal implications of normal and electronic signatures.

Normal sign and Legal implication

Though the Contract Act does not mandate the presence of signature to show the intention and consent of the parties, however courts have given a great evidentiary value to the signature on the agreement in proving the intention and consent of the parties to the contract. According to a Master Circular issued by the RBI in 2007, the signature of a particular person is merely a symbol and it can be in any language. Even the official document drawn up in English can be signed in Hindi where the name of the signatory may be typed in English. This is not restricted to the RBI only. In fact, there is no specified language to sign on a document irrespective of the language used therein.

Generally, people sign an agreement with their hand-written signature or thumb impression. These are the two widely recognised way to sign any agreement. These traditional signatures are very vulnerable to manipulation. There is always a possibility that someone can forge the signature. It is not a big deal to copy the handwritten signature of someone or get a thumb impression of a person without his knowledge. On the other hand, the long presence of these methods and cases of cheating developed in people a mind-set of carefully reading or knowing the content before signing any document. Furthermore, it is not used as frequently as an e-sign is used. Therefore, any reasonable person thinks and tries to know the content of the document before signing on it, unlike an e-sign where sometimes they are not even aware of what they are signing and its implications.

In the case of M. Kaliamoorthy v. Dhanuskodi, the court heavily relied on the signature of the respondent to decide the genuineness of the promissory notes. In this case, the respondent contended based on the report submitted by a handwriting expert that the signature on the note was forged by the appellant. This matter went till the second appeal and in each of the trials, the main focus of the court was to determine the genuineness of the signature on the note to arrive at a decision. In N. Mani v. State where allegation of fabrication, presentation, and encashment of cheques and withdrawal of cheque amounts through opening new accounts in different names were made against the accused. The court decided the case based on the genuineness of signature by comparing the signature of the accused with the signature used in such illegal transactions. There are many more judgments where signature played vital roles in judicial proceedings. Therefore, it is evident that the courts have given a strong evidentiary value to signatures.

Electronic Signature and Legal implication

Every aspect of our lives today is touched by technology. It is so subtle that we may not even recognise it as such. Just as subtle is the contracting aspect of technology. Most of our actions on the electronic medium result in contractual relationships, with each of us barely restricting the same. Our day starts with a peek at our mobile phones- be it to check for emails, messages on various social media platforms starting with "WhatsApp", on of the most popular instant messaging application or simply to catch up on news. At some point in time, we would have had to click on an innocuous virtual button, which prompted us to "Accept" or "Agree". Our brush with contracting has commenced with very little thought or concern. The mere click of the virtual button, therefore, results in a binding contract. Therefore, it became necessary to regulate the use of e-signature to save innocent people from damage.

Prerequisites for determining reliability of Electronic Signature

Section 3A of the IT Act sets out the prerequisite for determining the reliability of e-sign in the following points:

  • The signature creation data or the authentication data to be linked to the signatory or authenticator and of no other person.
  • The signature creation data or the authentication data, were under the control of the signatory or authenticator, at the time of signing and of no other person.
  • Alterations to electronic signature after affixing such a signature should be detectable.
  • Alteration to information to secure which electronic signature is affixed should also be detectable.
  • The central government may prescribe further conditions, which have to be complied with.
RBI’s guidelines on Electronic Signature

According to a report of the Reserve Bank of India (RBI), if the message matches the digital signature of the sender's private key, it does not mean that only the original sender could have sent it and no one else could have altered it in transit. RBI admits that the digital signature algorithm is vulnerable. The fault of this violation may or may not lie with the sender himself as it can be manipulated by others without the knowledge of the sender. It further says, in order to determine the authenticity in computing e-business, and information security, it is necessary to ensure that the data, transaction, communications or documents (electronic or physical) are genuine. It is also important for authenticity to validate both the parties involved who they claim to be. Some information security system incorporates authentication feature such as ‘digital signatures’ which give evidence that the message data is genuine and was sent by someone possessing the proper signing key.

There are several advantages associated with the digital signature. It is an electronic signature which can be used for the authentication of the identity of the sender of a message or the signer of a document, and to ensure that content of the message has not been altered in transit through the feature of cryptographic message digest function. Moreover, it also ensures that the signer of the document cannot later deny having signed it.

RBI issued guidelines on E-Tenders directing the vendors to use their own ID and Password along with digital signature at the time of submission of bids and mandated the submission of bids with a digital signature certificate to get acceptance from the system.

NPCI’s guidelines on Electronic Signature

National Payment Corporation of India (NPCI) says that any Aadhaar holder can digitally sign an electronic document without having to obtain a physical digital signature dongle irrespective of the need for the digital signature certificate through a printed paper application form with ink signature and supporting documents. The privacy of the signer is protected by sending only one hash of the document to e-sign online electronic signature service provider. Each signature requires a new key-pair and certification of the new public key by a certifying authority. This back-end process is completely transparent to the signer. Moreover, e-KYC data is not sent back to the Application Service Provider and retained only within the e-sign provider as e-KYC record.

SEBI’s guidelines on Electronic Signature

SEBI also allows the use of an electronic signature in the security market for efficient and secure functioning. It advised the Exchanges to modify/amend their by-laws, rules, and regulations to permit the signing of the electronic note with a digital signature to make the modified format of the electronic contract note a valid legal document like the physical contract note. SEBI allows the brokers to issue contract notes authenticated by means of digital signatures provided that the broker has obtained the digital signature certificate from Certifying Authority under the IT Act, 2000.

Conclusion

It is clear till now that though methods of e-sign are different from traditional hand-written signature nevertheless both have the same evidentiary value. However, it must be noted that e-sign is more secure than the traditional sign due to the complexities attached to it. After getting legal recognition from the IT Act, e-sign has been very conveniently adopted by institutions like RBI, SEBI, NCPI, etc. E-sign provides an efficient and more secure way to do business in the market. At the same time, people are also expected to be aware of the know-how of using e-sign to avoid any fraud.