What you need to know about IT Act Amendment

What you need to know about IT Act Amendment
What you need to know about IT Act Amendment

Lawful Electronic Signatures

Lawful electronic signatures are a secure way to ensure the seamless signing of your business documents and other commercial agreements. Let us elaborate on It Act Amendment in depth.

As per the Information Technology Act, 2000, “Digital signature means authentication of any electronic record by a subscriber using an electronic method or procedure by the provisions of section 3.” “Electronic signature” or eSign is the legal way to get consent on any online document or agreement under Section 2(1)(ta) of The Information Technology Act, 2000. The Information Technology Act of 2000 (the "IT Act or It Act Amendment") permits the electronic and digital signature of documents. Although the IT Act has a broad scope, it does not cover some contracts and transactions. The IT Act's First Schedule lists the types of papers and transactions to which it does not apply. These types of documents and transactions cannot be digitally signed. The First Schedule of the IT Amendment Act has recently been amended by a notification issued by the Ministry of Electronics and Information Technology.

These changes have been made: Entry No. 1 of the said Schedule, excluded the appliance of the IT Act to negotiable instruments other than a cheque. Hence, negotiable instruments couldn't be signed digitally, but cheques were exempt from this provision and they could be signed digitally. The amendment has included other negotiable instruments and brought them within the purview of the IT Act. Now, a cheque, a requirement promissory note or a bill of exchange issued in favor of or endorsed by an entity regulated by the RBI, National Housing Bank, SEBI, IRDAI and PFRDA, are often signed digitally. Since Entry No. 2 of the aforementioned Schedule contained a power of attorney, the IT Act Amendment did not apply to it. The modification permits the IT Act to be used for powers of attorney that authorize an organization governed by the RBI, National Housing Bank, SEBI, IRDAI, or PFRDA to act on behalf of the person executing them. As a result, a power of attorney in favor of organizations that are subject to their regulation can now be carried out digitally. Entry No. 5 of the said Schedule included “any contract for sale or conveyance of immovable property or any interest in such property”. Immovable property sales contracts were not covered by the IT Act and hence could not be digitally signed. Contracts for the sale or conveyance of real property are now covered under the IT Act thanks to the Amendment's deletion of Entry No. 5. A contract for the sale of real estate may now be executed digitally, thanks to this amendment.

Key Documents for eSigning

  • Cheques
  • Demand promissory notes (issued to RBI entities)
  • PoA between individuals and entities
  • Offer letters
  • Bills of exchange
  • Permission slips
  • Rental/lease agreements
  • Liability waivers
  • Financial Statements
  • Contracts for the sale of or interest in immovable properties

Validity of eSign under Indian Law

Here are some notable highlights to help you understand the scope and validity of electronic signatures as a legally binding method to sign documents in India:

  • The Information Technology Act, 2000 recognizes the legality of eSign under Section 5. It also recognizes the validity of your digital signature only if a Licenced Certifying Authorities have issued the Digital Signature Certificate (DSC) under the Ministry of Information Technology. The Certifying Authority has the power to issue, suspend, and revoke your Digital Signature Certificate.
  • The validity of eSign is also recognized under the Indian Evidence Act, 1882 as a proof presumption to an electronic agreement under Section 3, 22A, 47A, 67A, 85 and holds an evidentiary value under Section 73A and 65B.
  • After the Information Technology Act amendment in 2008, Section 3A was inserted into the Information Technology Act, 2000 to introduce a technology-neutral framework for electronically signing documents. The amendment is derived from Article 6 of the United Nations Commission on International Trade Law (UNCITRAL).
  • Section 3A of the Information Technology Act, 2000 mandates a technologically neutral reliability threshold that must be met for the Central Government to notify a new type of e-signature under Schedule II. Notably, supported by its “Digital India” objectives, the government increasingly wants businesses to leverage digital technology. To this end, the government’s Electronic Sign Act ensures that all your records that have been electronically signed are just as legally binding as those that have been wet-signed. The Licensed Certifying Authorities issue eSigns under the Ministry of Information Technology of India. An eSign is also admissible by the court as proof of existence, authenticity, and valid acceptance of a contract under Section 65B of the Indian Evidence Act, 1882. This enables your business to move forward without legal hassles, even where the signatories are not physically present.


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