16 May 2022
Electronic contracts also known as e-contracts are quickly replacing paper-based contracts as we move towards digital India. Parties prefer e-contracts for the benefits they offer, including being cost-effective, faster to execute, harder to forge, and not requiring the logistical hassles of signing paper contracts. In addition to these benefits, the COVID-19 outbreak and resulting nationwide restrictions in movement and physical interactions made it difficult for people to come together physically and sign paper contracts. The urgency in certain matters and the need for the companies to move ahead have made e-contracts more and more appealing.
Section 4 of India’s Information Technology Act, 2000 (“IT Act”) provides for recognition of electronic records i.e. any document which is required by law to be in writing, typewritten or in printed form, will be considered to be valid if it is rendered or made available in electronic form and accessible for a subsequent reference in future.
Section 10A of the IT Act provides that, in case of a contract formation, where the communication of proposals and acceptance are expressed in electronic form or by means of an electronic record, such contract shall not be deemed to be unenforceable solely on the ground that such electronic form or means was used for that purpose.
In other words, the recognition, validity and enforceability of e-contracts has been clearly set out under Indian law, and has also been accepted by courts and authorities as a binding form of agreement.
Recognized forms of electronic signatures
The IT Act recognises two types of e-signatures to verify and authenticate electronic documents and records.
Procedure for obtaining and using digital signatures, and e-authentication techniques
Use of digital signatures first requires procurement of digital signature certificates (“DSC”).
DSCs are signed by a Certifying Authority (which are trusted service providers licensed by a government authority to issue electronic/ digital signature certificates), after successful verification of the identity and the address of the applicant.
The CCA is the authority appointed under the IT Act to license and regulate the CAs.
Usually, a DSC is contained in a universal serial bus (“USB”) token with a personal PIN which can be used by plugging the USB into a computer and signing the digital document using that PIN. A DSC consists of three elements:
Validity and enforcement
As per section 5 of the IT Act, electronic signatures (including digital signatures) are recognized as valid signatures and any requirement of signature will be considered and deemed satisfied if the document is authenticated by way of electronic signature in the manner prescribed under the IT Act.
There is no difference between the enforceability of electronic/digital signatures and other accepted valid electronic signatures having the same status as handwritten signatures under Indian law.
There is a presumption of validity for electronic records signed using a valid electronic signature (as recognized under the IT Act), which is treated as equivalent to a wet-ink / physical signature.
Admissibility of digitally signed documents
Section 3 of the Indian Evidence Act, 1872 (“Evidence Act”) recognizes electronic records as documentary evidence.
As per Section 65B of the Evidence Act, any information contained in an electronic record is deemed as a document and will be admissible as evidence in any proceedings without further proof of the original, if it is accompanied by a certificate stating that:
Moreover, Section 85A of the Evidence Act states that every contract that purports to be an agreement containing the electronic signatures of the parties shall be presumed to be concluded by affixing the signatures of the parties. However, this presumption extends only to electronic signatures as recognised under the IT Act.
As per Section 85B of the Evidence Act, in any proceeding involving secure electronic/digital signatures, the court is required to presume that the secure electronic/digital signature is affixed by the subscriber with the intention of signing or approving the electronic record, unless proved otherwise.
Therefore, e-contracts and documents which are electronically signed will be deemed to be valid, unless proven otherwise.
The content of this article is for information purpose only and does not constitute advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer to relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up. The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that the Author / Treelife Consulting is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof.
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