The government’s Digital India project, which aims to improve digital infrastructure and move the nation toward a paperless economy, is driving the growing use of electronic signatures in India. Recent legal amendments now presume the authenticity of digital and electronic signatures on electronic agreements. Because of this, companies in India are utilizing electronic signatures more frequently to speed up and improve the efficiency of transactions. The move to digital signatures aligns with current worldwide trends and contributes to the acceptance and enforceability of electronic contracts and documents in the Indian legal system.
Electronic and certificate-based digital signatures in India are regulated by the Information Technology Act, 2000 (IT Act), and the following rules:
- Information Technology (Certifying Authorities) ACT, 2000
- Digital Signature (End Entity) ACT, 2015
- Information Technology (Use of Electronic Records and Digital Signature) ACT, 2004
Under Indian law, digital signatures based on certificates and electronic signatures have the same legal standing as handwritten signatures. Digital signatures are desired for some government transactions, like electronic filings with the Ministry of Corporate Affairs and goods and service tax filings.
To be accepted, electronic signatures must use one of the electronic authentication methods listed in the IT Act’s Second Schedule, such as Aadhaar e-KYC or other e-KYC services (like PAN-based e-KYC).
Agreements that use non-recognized electronic signatures are not void in and of themselves; trustworthy electronic and digital signatures are regarded as genuine under Indian law. For an electronic signature to be accepted under the IT Act, it needs to be:
- exclusive to the signatories
- under the signatory’s control at the moment of signing
- able to recognize changes made to the document or signature
- accompanied by a record of the signing procedure audit trail
- issued by a certifying authority (CA) that is acknowledged
Judges and magistrates are well-versed in e-signature laws, though some local authorities still require physical documents and wet signatures for certain records.
Unique Highlights
Aadhaar e-KYC: When using Aadhaar e-KYC as an authentication approach, the signatory’s identity must be verified using their Aadhaar number. As long as they adhere to the UIDAI’s security and privacy guidelines, businesses may voluntarily provide Aadhaar authentication under the Aadhaar and Other Laws (Amendment) Act, 2019.
Indian Stamp Act: The Indian Stamp Act of 1899 requires certain documents to be stamped at or before execution. There has yet to be a way to stamp electronic papers in India. Some states, including Delhi, Karnataka, and Maharashtra, require electronic records to be stamped. Businesses that sign and execute papers electronically must ensure they are properly stamped.
Transacting with Public Sector Entities: The IT Act makes using digital or electronic signatures to grant licenses and permits, process online payments, and file forms, applications, or documents with government organizations easier. Regulators have the authority to create policies governing the acceptance of documents and digital signatures. For example, the Companies (Registration Offices and Fees) Rules, 2014, and the Central Board of Direct Taxes processes outline the usage of digital signatures for particular filings.
Industries and Procedures Covered to Digital Signatures include:
- Digital Lending Services: Digital lending platforms require digitally signed loan documents to ensure the authenticity and integrity of financial transactions. These documents, signed electronically, streamline the lending process, offering convenience and security for both lenders and borrowers.
- Insurance Policies: Starting April 1, 2024, all insurance policies in India must be issued and digitally signed electronically. This regulatory requirement aims to modernize the insurance sector, enhance transparency, reduce paperwork, and facilitate faster policy processing. By implementing digital signatures, insurers can ensure the validity and legality of policy documents while improving customer experience through quicker turnaround times and seamless online transactions.
Industries and Procedures Requiring Traditional Signatures encompass:
- Negotiable Instruments: Documents falling under the purview of the Negotiable Instruments Act of 1881, such as promissory notes and bills of exchange, typically require traditional wet signatures. These instruments are crucial for financial transactions and legal obligations, demanding physical endorsement for validity and enforceability.
- Power-of-Attorney Documents: Governed by the Power-of-Attorney Act 1882, these documents empower individuals to act on behalf of others in legal matters. They traditionally necessitate physical signatures to authenticate the authority granted, ensuring legal compliance and clarity of responsibilities.
- Trust Documents: Defined under the Indian Trusts Act, 1882, trust deeds and related documents require traditional signatures to establish legal trusts. Physical endorsement ensures the integrity of commitments and obligations within the trust, providing security and certainty to beneficiaries and trustees alike.
- Wills and Testamentary Dispositions: Governed by the Indian Succession Act, 1925, wills and testamentary documents outline the distribution of assets after death. These documents must be physically signed to validate the testator’s intentions, ensuring the lawful transfer of property and assets.
- Notarization: Notarization, performed by registered notaries, involves affixing a physical seal and wet signature to authenticate documents. This process verifies the authenticity of signatures and content, often requiring physical verification of documents to ensure compliance with legal formalities and safeguard against fraud or misrepresentation.
Summing up
This article examines the national legal system that controls electronic signatures. It draws attention to the effects of the Digital India program, which supports digital infrastructure and strives for a cashless society. Electronic and digital signatures are governed by the Information Technology Act, 2000 (IT Act) and other regulations, which give them the same legal standing as handwritten signatures. The prerequisites for legitimate electronic signatures are described in the article, including detectability of modifications, control, and uniqueness. It also discusses the consequences of the Indian Stamp Act for electronic papers and special concerns for Aadhaar e-KYC. The article also addresses how companies and government agencies use electronic signatures, highlighting how these signatures are becoming increasingly important in India’s digital environment for expediting transactions and improving efficiency.
