With the internet, everything is a click away. From daily essentials to luxurious services, nothing is out of reach. All such e-transactions come under the purview of e-commerce. With the fast-paced life, e-commerce is convenient for most of us. With services like one-day delivery, let’s be honest we are loving it. There are various components involved in e-commerce. This article explains the laws governing e-commerce.

Introduction

In simple terms, e-commerce refers to the transactions through the electronic medium rather than the physical one. When any transaction occurs over the internet it comes under the aegis of e-commerce. It was in 1994 when the first e-commerce transaction was made. When Phil Brandenberger of Philadelphia went shopping for a compact audio disk, paid for it with his credit card he made history. 1Attention Shoppers: Internet Is Open, www.nytimes.com

Internet was introduced to India in 1995 and soon e-commerce followed. The first e-commerce in India happened 1996 in the form of marriage portals in a B2C form. 2Evolution Of E‐Commerce In India Challenges Ahead (Part 1), http://isid.org.in/pdf/DN1407.pdf And after that in the form of recruitment portals in 1997 E-commerce is the fasted growing industry.

Fast forward two decades, India’s E-commerce revenue in 2017 was US$ 39 billion. With the number of internet users on a constant rise let’s fast forward another three years, the expected e-commerce revenue is US$ 120 billion in 2020, a jump of US$ 81 billion, growing at an annual rate of 51 per cent, the highest in the world. India has substantial potential for the e-commerce market.

In 2020 it is expected that 175 million people will be online shoppers. It is a lucrative market even for investors. E-commerce and consumer internet companies in India received more than US$ 4.32 billion in private equity and venture capital. 3Ibid In 2019, e-commerce retail sales reached a high of US$ 3.53 trillion across the world, with expected growth even in 2020.

Today, e-commerce has become an important part of our lives. Everything we need or want is a click away. It is all within our reach. As e-commerce grew the need for regulation also emerged.

UN

Internet became a common phenomenon by the 1990s. Consequently, the 90s also saw an emergence of e-commerce across the globe. International trade became easier with the internet. And as E-commerce comes within the ambit of trade, it was regulated under international trade rules. Noting the increasing number of international transactions on electronic medium; the United Nations under the United Nations Commission on International Trade Law, went on to develop the – Model Law on Electronic Commerce. The law under MLEC applies to any kind of information in the form of a data message used in the context of commercial activities. The interpretation clause clearly states that when this law is applied regard is to be had to its international origin.

MLEC

The UNCITRAL Model Law on Electronic Commerce was adopted by the United Nations Commission on International Trade Law (UNCITRAL) in 1996. In order to, further its mandate to promote the harmonization and unification of international trade law. MLEC was a response to the paramount change in the method of communication. Electronic medium took over the communication. This impacted international trade, as this was unprecedented.

Additionally, the purpose of the MLEC is to assist as a model. This model is to be used by countries to establish relevant legislation where none existed. It serves as a basis for the development of such legislation.

Many deliberations took place among the members of the working group for drafting the Model Law. And finally, in 1996 at its twenty-ninth session, the Commission, after consideration of the text of the draft Model Law as revised by the drafting group, adopted it at its 605th meeting, on 12 June 1996.

E – Contracts

The grundnorm for any transaction is a contract. Under MLEC article 11 creates provision for formation and validity of contracts. This article states that even if the essential conditions of a valid contract i.e. offer and acceptance are communicated using the electronic medium, the contract remains enforceable. The next essential issue when it comes to contracts is time and place of acceptance.

Article 15 deals with the matter of time and place of dispatch and receipt of data messages. The communication of the proposal is complete as against the proposer when he/she sends an electronic message (of the proposal); that message is received by an ‘information system’ in other words a phone/laptop/tablet/etc. (let’s use the device as a common term of all) which is out of the control of the proposer. The acceptance of the proposal will be complete as against the acceptor when he/she sends an e-message (conveying acceptance) and the message is received in a device which is out of the control of the acceptor. When the same e-message of acceptance of proposal reaches the device. In both the cases, that of proposer and acceptor the place is their respective places of businesses.

Information Technology Act

The Act was enacted in 2000. Main purpose of the Act is to extend legal acceptance to those transaction that are carried via electronic mediums. In other words, this is known as e-commerce. Also, to facilitate electronic filing of documents with the Government agencies and further to amend the Indian Penal Code, the Indian Evidence Act, 1872, the Banker’s Books Evidence Act, 1891 and the Reserve Bank of India Act, 1934 and for matters connect with the Act.

E-Commerce Laws in India

E- Signature

As the transactions are taking place online, it is especially difficult to affix a signature (physical) on the documents. This is made easy by the use of e-signatures.

Reliability and legality

Section 3A of the Act creates provision for e-signature. For any e-signature to be considered reliable and valid the following conditions have to be fulfilled –

  1. The creation or authentication data for e-signature has to be linked only to the signatory or the authenticator.
  2. The creation or authentication data for e-signature has to be under the control of the signatory or the authenticator at the time of signing.
  3. Any alteration to the e-signature made after affixing such signature is detectable.
  4. Any alteration to the information made after its authentication by e-signature is detectable.

As anyone possessing such data for an e-signature can misuse the same. These conditions are prescribed in order to ensure that the e-signature is bona fide.

Consequently, if the e-signature fulfils all the conditions and is deemed reliable, the matter of its legal validity is questioned. Section 5 of the Act creates provision for Legal recognition of electronic signatures. The section states that when it is provided by any law that any information has to be verified by way of signing; in that case, a digital signature falls under the ambit of signature.

Certificate

It is stated in section 35 that any person can make an application for e-signature certificate. All of the applications for e-signature require a fee. The fee will not be more than twenty-five thousand. An application for e-signature will not be rejected unless the applicant has been given a reasonable opportunity of showing cause against the proposed rejection.

An authority to grant an e-signature certificate certifies the following  –

  1. Subscriber (person relying on) of the e-signature certificate is provided with the same and they have accepted it.
  2. They hold the private key corresponding to the public key, listed in the Digital Signature Certificate
  3. They hold a private key which is capable of creating a digital signature
  4. Information contained in the Digital Signature Certificate is accurate
  5. The public key to be listed in the certificate can be used to verify a digital signature affixed by the private key held by the subscriber
  6. Subscriber’s public key and private key constitute a functioning key pair

The certifying authority has the power to suspend an e-signature certificate if the following situations arise –

  1. if they receive a request from the subscriber as listed in the e-signature certificate or his/her agent authorised for the same.
  2. if it is of opinion that the Digital Signature Certificate should be suspended in public interest

The certifying authority has the power to revoke an e-signature certificate if the following situations arise –

  1. if they receive a request from the subscriber as listed in the e-signature certificate or his/her agent authorised for the same.
  2. a material fact represented in the Digital Signature Certificate is false or has been concealed:
  3. a requirement for issuance of the Digital Signature Certificate was not satisfied;
  4. the Certifying Authority’s private key or security system was compromised in a manner materially affecting the Digital Signature Certificate’s reliability;
  5. the subscriber has been declared insolvent or dead or where a subscriber is a firm or a company, which has been dissolved, wound-up or otherwise ceased to exist.

E-contracts

As the above states e-contracts sub-heading above, e-contracts are not unenforceable solely on the ground that they are in e-form. Section 10A of the Act creates provision for validity of contracts formed through electronic means. The proposal and acceptance rules under e-contract as mentioned in the Act are similar to MLEC. The provision for the same is created by section 13.

Jurisdiction

In case there is a breach of any of the provisions, and the matter is for adjudication; it shall be adjudicated by an adjudicating officer. Where the adjudicating officer is an officer not below the rank of a Director to the Government of India or an equivalent officer of a Stale Government; he shall have the jurisdiction to adjudicate on matters where the claim for injury or damage does not exceed rupees five crores. 4Information Technology Act, 2000, S. 46. In case the claim for injury or damage exceeding rupees five crores jurisdiction lies with the competent court.

Need for uniformity

 India is a quasi-federal country. Naturally, the framers of the constitution, to ensure India’s quasi-federal nature formed the three lists. Together, they constitute the 7th schedule. The state list provides the subjects that the state government can regulates; the central list provides the subjects that the central government regulates; and finally, the concurrent list provides subjects that both the central as well as the state government can legislate. Although, in case there is a conflict between the state government and the central government under concurrent list the central law prevails.

The need for uniformity is derived from the division of subjects in the lists. The segregation in these lists worked well, that is until electronic medium took over. The emergence of e-commerce has reduced the impact of distance and language. The main law governing e-commerce is the IT Act which is a central legislation. Nevertheless, this hasn’t stopped the states from forming localised legislation.

One such example is Karnataka. The state government has imposed an additional charge on the e-commerce companies providing services like cabs. Another example would be Goa. This tourist-economy based state is changing e-commerce law to make tourism difficult. Here, the government amended the Goa, Daman and Diu Registration of Tourist Trade Act, 1982 by the Goa Registration of Tourist Trade (Amendment) Act, 2019. Making it compulsory for online travel aggregators and hotels to register their business to continue operations. This has raised concern among the sector.

This is a cause for concern as having differing laws causes a hindrance for business. It causes difficulty for the smooth running of e-commerce. This is essential for India as a nation to improve Ease of doing business ranking. Currently, India is ranked at sixty-third position. 5Doing Business 2020: Reforms Boost India’s Business Climate Rankings; Among Top Ten Improvers for Third Straight Year, www.worldbank.org 

Conclusion

E-Commerce Laws in India

The importance of e-commerce is increasing exponentially. E-commerce is bringing a change in the way we perceive the world. Not only that, but it is also bringing a change in the way we work. A team can be hundreds of miles apart yet stay connected and work together. This change is here to stay. This makes the laws regarding e-commerce necessary. Uniformity of laws becomes an issue, as to increase the revenue India earns from e-commerce it is important to have smooth and coherent regulation.

For any business small or large, not to have an e-commerce strategy is a mistake.

William M. Daley

 

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  • May 16, 2020

    Did not know about this. Very interesting. And I agree e-commerce is the future.

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