Key features of Information Technology Act

Vaibhav Parikh

IN a short span of time the world has experienced a revolution in doing business the Internet way. Most businesses have either embraced e-commerce or are trying to assess its impact.

In India also, e-commerce fever has gripped businesses. The recent success of the ADR issue of Satyam Online, a one-year-old, loss-making company, which secured a nearly $1-billion valuation within three days of trading, is an indication of the things to come. A basic ingredient for the growth of e-commerce is infrastructure, both legal and physical. The existing legal structure is inadequate to handle these issues and there is a need for a comprehensive cyber law to deal with issues arising from e-commerce.

The Information Technology Act (ITA), currently being considered by the Cabinet seeks to facilitate the development of a reliable regulatory environment for e-commerce by clarifying issues relating to the validity of e-contracts, e-signature and the use of e-records in evidentiary proceedings.

The ITA broadly deals with the following issues:
I Recognition of electronic records and digital signatures
I Dispatch and receipt of electronic records
I Certifying authorities
I Computer crimes
I Liability of network service providers
I Amendments to other Acts

Recognition of electronic records and digital signatures: As digital signatures are not recognised by the existing laws, the growth of e-commerce is hindered as there are doubts over the enforcement of online transactions. Electronic records and digital signatures will now be granted legal recognition, if the record and signature fulfil certain conditions.

Digital signatures using asymmetric cryptography, where public and private key pairs are involved is allowed. A message encrypted using a private key can be decrypted using the corresponding public key only, assuring the recipient of the message that the message was sent by the person with the corresponding private key.

Applications to the Government for the issue of licence, sanctions and approvals can be made in electronic form and the Government can issue licences and approvals similarly.

From the ITA, it seems that companies can be granted digital signatures, since the terms of the ITA state that a digital signature granted to a company can be revoked on dissolution of the company. This position seems unique since under traditional law, a person is authorised to sign on behalf of the company and a company does not sign its own signature.

Electronic records and digital signatures are treated as secure electronic records and secure digital signatures if the parties adopt the security procedure prescribed by the Central Government.

The Central Government will consider the nature of the transaction, volume of similar transactions, availability and cost of alternative procedures before prescribing the security procedure.

Dispatch and receipt of electronic records: The Act sets a mechanism for the dispatch and receipt of electronic records where the dispatch of an electronic record occurs if it enters an information system outside the control of the person who sent the record and is received when the record enters the information system of the addressee.

If the parties have agreed on an information system, receipt of the electronic record occurs at the time it enters the information system. However, if the record enters an information system other than the agreed system, receipt of the record occurs at the time the record is retrieved.

The Act establishes a default mechanism for the place of dispatch and receipt of documents. The electronic record is dispatched at the place the originator of the message has his principal place of business and is received at the place where the addressee has his principal place of business.

The rules as to the place and time of dispatch and receipt of documents are relevant to determine the time and place for the completion of online contracts and are important to determine the court that would have jurisdiction over the online transaction.

The author is with the Technology Law Division of Nishith Desai Associates, Mumbai. Response can be e-mailed to

(This article reflects the opinion of the author alone and does not in any way mirror the opinion of his firm. This article should not be construed as legal advice.)
Source : The Business Line. October 29, 1999