eSignature legality
in India

In India, an electronic signature consists of different methods of attaching identity to a document; they use electronic process and can be as simple as a picture of a hand-written signature or could be as complex as a digital signature certificate generated using public key interface (PKI). Depending on the specific use case, different types maybe used- each offering different level of authentication of the identity attached. Moreover, the Government of India has promoted the use of digital technologies by Indian citizens and corporations. Electronic and certificate based digital signatures are regulated by the Information Technology Act, 2000 (IT Act) and the following rules made under this Act:

The IT Act of 2000, according to its preamble, is a law that establishes legal recognition for transactions involving electronic data interchange and other forms of electronic communication, generally referred to as "electronic commerce," and that involve the use of non-paper-based methods of communication and information storage. As a result, an electronic signature is used to verify an electronic record.

An electronic signature can be in any form, such as- a text, sound, any pattern, password or a symbol. For e.g., various methods used to unlock our mobile system are all types of electronic signatures.

Electronic signatures have been recognized under the IT Act for over 21 years now and it provides for various benefits such as ease of doing business, streamlining the storage records, improving the safety, security, and cost effectiveness of records. As per the Indian law, a valid electronic signature must include an electronic authentication technique or procedure as specified under the Second Schedule of IT Act. Further, the second schedule currently prescribes the following e-KYC authentication techniques and procedures:

In India, compared to other "non-recognized" electronic signatures, reliable electronic and digital signatures have a presumption of validity. For an e-sign to be considered reliable and presumptively valid under the IT Act the following reliability conditions should be satisfied:

There is a presumption in favor of the validity of any document signed with an electronic signature if each of the above-mentioned reliability conditions is met.

As per Section 10A of the IT Act, contracts that are otherwise valid will not be rendered invalid merely because they were executed or made in electronic form. Therefore, documents signed using electronic means other than those prescribed under the It Act are not invalid.

Therefore, in case of dispute concerning validity of an electronic contract, the onus of proving fulfilment of essentials of a valid contract and execution of contract using a technology that followed Reliability Conditions lies on the party claiming the validity.

In the afore-mentioned situation, the following industry best practices should be implemented to help satisfy the requirements of the IT Act:

Electronic records validated with digital signatures are accepted by government agencies such as the Ministry of Corporate Affairs, the Department of Revenue, and the Ministry of Finance. Digital signatures are the preferred way of execution for income tax and GST (goods and services tax) e-filings with the Ministry of Corporate Affairs.

The Reserve Bank of India (RBI) has given small financing banks and payment banks permission to use electronic authentication to authenticate the terms and conditions of their banking relationships. The RBI also permitted all regulated firms to use a one-time password (OTP) based e-KYC process for onboarding customers, subject to certain circumstances.