Overview: Electronic means of document execution have been gaining popularity since the past decade owing to the convenience they bring, and their undeniable potential in environmental conservation. However, in today's pandemic-stricken times where conventional forms of execution of documents are crippled, electronic execution of documents is no longer considered merely an...
Overview:
Electronic means of document execution have been gaining popularity since the past decade owing to the convenience they bring, and their undeniable potential in environmental conservation. However, in today's pandemic-stricken times where conventional forms of execution of documents are crippled, electronic execution of documents is no longer considered merely an "idealistic alternative", but rather a compelling necessity. This article aims at analyzing how documents executed through electronic means may be viewed under the statutory framework of Indian Law.
Induction of Electronic Signatures under the IT Act, 2000 ("IT Act"):
The IT Act did not recognize electronic authentication of documents through any means other than through "digital signatures", prior to the 2008 amendment. Subsequent introduction of the term "electronic signatures" in place of "digital signatures" throughout the IT Act, effectuated via the 2008 amendment, clearly reflects the legislature's intent in conferring acceptability to a wider set of electronic authentication techniques, than previously contemplated. In fact, the IT Act has its genesis in adoption of the UNCITRAL Model Laws on E-Commerce, which envisaged adoption of secure electronic alternatives to traditional paper and ink based authentication methods, and therefore the 2008 amendment was a further step in this direction.
Statutory requirements of an Electronic Signature:
Digital signatures are statutorily recognized as the most secure kind of electronic signatures, since they allow authentication of documents using encryption and decryption mechanisms, thereby ensuring integrity. Electronic signatures, in common parlance could refer to multifarious means of affixing signatures to documents electronically, having varying degrees of reliability, including imposing a scanned image of a signature upon a document. However, under the IT Act, for a mechanism of electronic authentication to qualify as an "electronic signature", such technique would have to be (i) reliable, and (ii) specified under the second schedule to the Act. Section 3A(2) of the IT Act specifies the following prerequisites for determining the reliability of a technique used for electronic signatures:
- "the signature creation data or the authentication data are, within the context in which they are used, linked to the signatory or, as the case may be, the authenticator and to no other person;
- the signature creation data or the authentication data were, at the time of signing, under the control of the signatory or, as the case may be, the authenticator and of no other person;
- any alteration to the electronic signature made after affixing such signature is detectable;
- any alteration to the information made after its authentication by electronic signature is detectable; and
- it fulfils such other conditions which may be prescribed."
A strict and conservative reading of the relevant provisions[1] of the IT Act imply, that even if a particular technique meets the reliability criterion as specified under section 3A(2), stipulation of such technique in the second schedule would remain a condition precedent for such technique to be rendered a statutorily recognized means of affixing electronic signatures. The second schedule of the IT Act, currently only refers to an e-authentication technique using Aadhaar e-KYC services, thereby ousting all other forms of electronic signatures.
Validity of contracts, not authenticated through statutorily recognized electronic signatures:
The foregoing interpretation casts a shadow of doubt upon the enforceability and validity of contracts executed by affixing electronic signatures, through means other than the Aadhaar e-KYC technique, including the widely popular Docusign.
The pertinent question that arises, is whether a contract that has been electronically signed by both parties (using means other than the Aadhar e-KYC technique) and exchanged over email between the parties, is unenforceable, only for the reason that the said contract does not bear a statutorily recognized electronic signature?
In the Trimex case[2], the Hon'ble Supreme Court of India, while dealing with the necessity of formal execution of a contract for enforceability of its terms, opined as follows:
"Once the contract is concluded orally or in writing, the mere fact that a formal contract has to be prepared and initialed by the parties would not affect either the acceptance of the contract so entered into or implementation thereof, even if the formal contract has never been initialed."
Another relevant extract from the said judgement:
"The celebrated judgment of Lord Du Parcq in Shankarlal Narayandas Mundade v. The New Mofussil Co. Ltd. & Ors. AIR 1946 PC 97 makes it clear that unless an inference can be drawn from the facts that the parties intended to be bound only when a formal agreement had been executed, the validity of the agreement would not be affected by its lack of formality."
Hence, it can be deduced, that exchange of a contract over email between the parties to the contract, without any dispute or contingency as to its terms, signifies the acceptance of such terms by both parties, and their intent to create a legally binding relationship. This inference would stand true, irrespective of whether the exchanged electronic copy of the contract bears a statutorily recognized electronic signature, or bears no signature whatsoever, unless the parties have stipulated formal execution of the contract as a prerequisite for being legally bound. This principle is also enshrined in section 10A[3] of the IT Act, which gives statutory colour to offer, acceptance and formation of contracts through electronic form and means.
Presumption of validity: Digital Signatures vs Electronic Signatures
As between a document authenticated through digital signatures on one hand, and through electronic signatures not specified in the second schedule of the IT Act on the other hand, the essential difference is, that whilst the former enjoys the privilege of a presumption of authenticity and admissibility[4], the latter requires to be demonstrably proven for its authenticity.
Applicability of Electronic Signatures to certain instruments:
The IT Act does not apply to certain documents such as Wills, Trusts, and Negotiable Instruments[5]. These documents require conventional written documents and handwritten signatures to be valid.
[1] Co-joint reading of the following sections of the IT Act:
2(1)(ta) ―electronic signature means authentication of any electronic record by a subscriber by means of the electronic technique specified in the Second Schedule and includes digital signature;
3A. Electronic signature.—(1) Notwithstanding anything contained in section 3, but subject to the provisions of sub-section (2), a subscriber may authenticate any electronic record by such electronic signature or electronic authentication technique which— (a) is considered reliable; and (b) may be specified in the Second Schedule.
[2] Trimex International Fze vs Vedanta Aluminium Limited,India on 22 January, 2010 – SC
[3] 10A. Validity of contracts formed through electronic means.—Where in a contract formation, the communication of proposals, the acceptance of proposals, the revocation of proposals and acceptances, as the case may be, are expressed in electronic form or by means of an electronic records, such contract shall not be deemed to be unenforceable solely on the ground that such electronic form or means was used for that purpose.
[4] Co-joint reading of section 15 of the IT Act and section 85b of the Indian Evidence Act
[5] Section 1(4) of the IT Act