COVID-19 has taught us new ways of working remotely. However, while working remotely, one of the challenges we encounter is ensuring that legal agreements and other documents are signed properly. Though the practice of electronic signatures has been widely adopted and accepted by majority, however, there is always a question as to whether the electronic signing of legal agreements is duly recognised under Indian law.
Electronic signatures, or e-signatures, has been recognized since the Information Technology Act, 2000 was passed more than 20 years ago. The IT Act treats electronic signatures recognized under it as those that are signed with a ballpoint pen, subject to a few exceptions. It also generally allows documents to be signed using any form of e-signature. However, an e-signature must satisfy a number of conditions, and certain checks must be done before it can be relied upon.
The IT Act broadly provides for the enforcement of e-signatures, and recognizes two types of e-signatures as having the same legal status as physical ones. The methods specifically recognised under the Act are:
- Electronic signatures that combine an Aadhar identity number with an electronic Know-Your-Customer (eKYC) method; and
- Electronic signatures generated through an asymmetric cryptosystem.
For the above two types of e-signatures to be valid under Indian law, they must satisfy these additional conditions of reliability:
- Electronic signatures should be uniquely linked to the person signing the document;
- The signatory must have control over the process to generate the e-signature;
- Any alteration to the affixed e-signature must be detect-able, such as encrypting the document;
- There should be audit trail of the entire signing process, such as date, time, IP address, etc.; and
- Signing certificates must be issued by a certifying authority (CA) recognised by the Controller of Certifying Authorities appointed under Section 24 of the IT Act to issue digital signatures. The list of licensed certifying authorities is available at MCA website at https://www.mca.gov.in/MinistryV2/certify-ingauthorities.html .
Electronic signatures on each and every document are not allowed under the IT Act. As provided in the First Schedule of the IT Act referred under Sub-section (4) of Section 1, it prohibits electronic or digital signing or execution of the following transactions:
- Negotiable instruments (other than cheques);
- Powers of attorney;
- Trust deeds;
- Wills or any testamentary dispositions; and
- Contracts related to immovable property, such as sale deeds or lease deeds.
Although electronic signatures have revolutionised the remote execution of documents, they come with their own set of issues. Signing of certain documents is also subject to the payment of the requisite stamp duty. Currently, only a few states in India provide the facility of payment of e-stamps. Hence, before electronically signing any document, it needs to be ascertained whether the document should be stamped before signing and executing electronically. If a document is unstamped or not properly stamped, then in some cases penalties may be levied while enforcing the document.
Another issue is that while working from remote locations, several organisations have adopted digital signing of various agreements through different modes and then exchanging the executed agreements over email. While emails are acceptable in all courts and tribunals, however, to establish strong admissibility of digitally signed agreements, such emails received with the digitally executed agreements need to be saved. As per the Hon’ble Supreme Court’s judgment last year in Arjun Panditrao vs. Kailash Krishan, a certificate under Section 65B of Evidence Act is mandatory for filing of all electronically generated documents. Therefore, while initiating any legal proceeding and submitting copies of emails and other digitally executed documents, one needs to ensure filing of the 65B certificate duly signed by the person who is the sender or receiver of such emails or originator of such documents.
Using electronic signatures may be essential to ensuring that business is transacted smoothly during this time of uncertainty. It is recommended that only electronic and digital signatures as recognised by the IT Act be used to avoid any risks, such as admissibility and enforceability of documents. Furthermore, requirement of payment of stamp duty, and preservation of proof of electronic execution of document for future requirement of certificate under Section 65B of the Evidence Act are also needed to be taken into consideration while executing a document through an electronic signature.
About the author
Amit K Das is presently the general counsel of Kirloskar Oil Engines. With around 20 years of legal experience, Das focuses on implementing new and inno-vative processes and practices for carrying out legal activities. The views expressed by the author are personal and have no bearing on the organization he represents.