This article is written by Tanai Nadkarni.

Introduction 

E-commerce means a commercial activity between various entities through electronic media, such as Internet.  Thus, the term “E-commerce” is synonymous with “Electronic Commerce.”  As the technology development continues, it brings more & more challenges to the lawmakers to regulate the commerce. In India, in the year 2000, as computers & electronic networking started taking more part in people’s daily lives, the lawmakers in India enacted “Information Technology Act, 2000” to regulate the activities of the people using electronic media. With time, the computer applications and software systems improved and made it simpler even for a common man to get on the Internet and start trading through it. This created e-marketplaces around the globe.

The Internet brought sellers and buyers from around the world to transact with each other.  The various payment gateways came along and helped manage the monetary part of such transactions, while operating from a totally different nation. Now, the development in Block-chain technology has introduced electronic currency such as Bitcoin, Ethereum and likewise, which have been introduced by a few traders as acceptable currencies.  These electronic currencies are not regulated by any government, and are based on the concept of unregularised free-commerce. 

Such is now the complexity of the commercial activities which are becoming increasingly acceptable and happening to the point where these are eating into the brick and mortar traditional businesses. Examples, such as Amazon, Flipkart, Bigbasket, and many many more are the cause of many traditional shops and superstores to shut down.  This e-commerce is also a big challenge for the government to levy various taxes such as GST or VAT etc.  Additionally, when a local business is shut down and is replaced by an e-commerce vendor, it causes loss of revenue to the local jurisdiction and thus lowers the income of the government.

For such reasons as described above, the lawmakers need to evolve the law for basically two reasons. Firstly, to regularise the trade and secondly, to ensure that the tax collections from the trading activities are well-maintained for the governments. But, then comes the main hurdle for the lawmakers, that is to deal with the jurisdiction of the law which they want to enact, especially considering the situation when the trade is happening cross-border.

The E-commerce also includes, in addition to buying and selling, activities such as payments, deliveries, supply-chain and management & availability of services which are highly dependent on computer servers, hosting websites, availability of utilities such as electricity and so many other things.

When the vendors and purchasers are both in India, it becomes a much simplified task for the enforcers of the law to control such trade.  This is so, because all the laws enacted within India are applicable to such e-commerce. The regularisation of e-commerce though not impossible can be complicated and costly. The reason being is that the true identities of the buyers as well as sellers cannot be determined.  This affects the reach of criminal law and contract law in case any minor is involved.  

Contents

The courts of law primarily have to deal with territorial and pecuniary jurisdictions. Related to e-commerce dispute, deciding territorial jurisdiction gets more complicated, mainly because when it comes to the Internet, there are no borders between the countries.

Provisions of Indian law

The websites registered in India to conduct e-commerce are governed by all Indian laws, such as Information Technology Act, 2000; Consumer Protection Act, 1986; Code of Civil Procedure, 1908; and Indian Contract Act, 1872.  If there is any criminality involved in the e-commerce which is defined under Indian Penal Code, 1860 or violation of the intellectual property laws such as The Copyright Act, 1957 or The Patents Act, 1970, then the such can be dealt appropriately by summoning the identity of the either party in the dispute.  The rules formed under IT Act, 2000 define that the e-commerce websites operating in India are intermediaries, and therefore need to do due diligence pertaining to the cyber law.

Information Technology Act, 2000 and E-commerce

The preamble of this Act states, 

“An Act to provide legal recognition for transactions carried out by means of electronic data interchange and other means of electronic communication, commonly referred to as “electronic commerce”, which involve the use of alternatives to paper-based methods of communication and storage of information, to facilitate electronic filing of documents with the Government agencies and further to amend the Indian Penal Code, the Indian Evidence Act, 1872, the Bankers’ Books Evidence Act, 1891 and the Reserve Bank of India Act, 1934 and for matters connected therewith or incidental thereto.”

Illustration:  If a person residing in UK commits a fraud through a e-commerce website then this person can be prosecuted in India under the Information Technology Act, 2000. 

Indian Penal Code, 1860 and E-commerce

A person who commits an offense using E-commerce can also be charged under Indian Penal Code, 1860 and will be prosecuted according to the Criminal Procedure Code, 1973.  If the accused is identified and is residing abroad, then Letter Rogatory can be issued u/s 166A of CrPC, and the accused can be extradited after due process. 

Illustration:  A person residing in Singapore commits from Singapore an offense u/s 420 of IPC through a website, then such person can be charged under this Code and can be extradited to stand trial using Letter Rogatory.

Code of Civil Procedure, 1908 and E-commerce

To avail civil remedy as prescribed in the Code of Civil Procedure (CPC), a plaintiff at his own discretion can approach the local civil court invoking its jurisdiction and sue the defendant claiming damages as a compensation for his loss occurred due to commission/omission of the defendant when such act is purported through a website, and no matter where the defendant is residing. The notices can be duly served as long as the identity of the defendant can be established.

Illustration:  A company in the USA sells a software through its website to an Indian company, but the software has undisclosed deficiencies and thus there is a failure of the system used by the Indian company; then the Indian company has a discretion to sue this American company either in India under its local jurisdiction or sue the defendant in the USA.

Micro, Small and Medium Enterprises Development Act, 2006 and E-commerce

If two companies are in the B2B (business-to-business) e-commerce and if the plaintiff is registered under the MSMED Act, 2006, then the plaintiff can seek compensation up to three times the amount owed by the defendant after elapsed of prescribed period.

Analysis

There are basically two main theories of jurisdiction. In rem and in personam jurisdiction.

In Rem Jurisdiction   

It is the jurisdiction related to a thing. Intellectual property rights such as copyright or registered trademark or patent right are all rights in rem. However, when a person violates the copyright of another person during e-commerce then this becomes a right in personam. And the jurisdiction matters.

Example:  A trademark holder in India files an in rem action against the Internet domain names themselves on the theory that domain names incorporating their famous trademarks violates the Trade Marks Act, 1999 and are subject to cancellation and transfer to the trademark owner. Such in rem complaint does lack personal jurisdiction and would raise statutory concerns. The present E-commerce law in India has deficits to deal with such situation.

In Personam Jurisdiction

In Personam means related to personal. Sections 19 and 20 of the CPC provide for the jurisdiction of courts where a civil suit could be filed and defended when a person commits or is defending a tort.  These sections provide jurisdiction when tort arises out of contract; however, when there is no contract or not even quasi-contract.

Case law:  In World Wrestling Entertainment, Inc. v. M/s. Reshma Collection & Ors, the Appellant was a company registered in the United States of America and the Respondent was a company from Mumbai. The suit was decided by a single bench of Delhi High Court and while overturning the order of a single judge, it held that jurisdiction in e-commerce cases involving trademark and copyright disputes would be determined by the buyer’s place of residence.

This clearly shows that the current laws in India relating to e-commerce lack prescription in any form of enactments to establish a specific jurisdiction to deal with the matters pertaining to the infringements on the intellectual property rights during e-commerce activities.  That is, when there is a transition of In Rem juridiction to In Personam jurisdiction, as it happened in World Wrestling Entertainment, Inc. v. M/s. Reshma Collection & Ors, the laws in India lack specific enactment.

The main reason that makes this difficult is the lex fori nature of the jurisdiction of the Indian laws. It make jurisdictional issue quite challenging in order to deal with the remedies effectively.  The enactments such as “Indian Evidence Act”, “Code of Civil Procedure”, “Consumer Protection Act”, “Indian Contract Act” or even “Information Technology Act” are all domestic laws and can provide very limited civil remedy when the remedy involves international disputes arising out of e-commerce. Though there are several laws which may help to deal with e-commerce disputes; however, the question is that how far these laws can actually help deliver the full and final remedy to the aggrieved person. Let’s elucidate the efficacy of the present civil laws in dealing with disputes arising out of E-commerce.

Identity of Defendant: The foremost challenge for practicing lawyers is to first find the true identity of the defendant, because the notice of hearing must be serviced to the right person and the report of service must reach back to the Court to show that the notice was served correctly. 

Affordability of litigation: The other challenge faced by the plaintiff’s lawyer is when the amount of loss is comparatively smaller. The ability of the plaintiff to bear the cost of litigation can be prohibitive for him from conducting the trial till the end.

Execution of Decree:  The other challenge dealt by the practicing lawyer is to execute the decree in order to recover the damages. The remedies in execution such as attachment of the property or garnishment which are located outside the territorial jurisdiction of the court can create an uphill task for the practicing lawyer of the decree-holder.

In the United States of America, the jurisdiction held by the E-commerce law is based on “Minimum Contacts” theory.  According to this theory, the Courts may exercise personal jurisdiction over persons who have sufficient minimum contacts, such as physical presence, financial gains, stream of commerce and election of the appropriate court through contract, with the forum state.   However, in Asahi Metal Industry Co. v. Superior Court, the Supreme Court clarified that even when the defendant has a minimum contact, a court’s asserting jurisdiction over the defendant may still be improper as it would be unfair to the defendant.

Another principle called “long-arm statute” applied by the courts in the USA allows them to obtain in personam jurisdiction over an out-of-state defendant on the basis of certain acts committed by an out-of-state defendant, provided that the defendant has either transacted any business within the state or committed a tort within the state.

The other challenge that arises is to establish the jurisdiction when the trade takes place using a digital currency vis-à-vis crypto-currency such as Bitcoin.  The Reserve Bank of India had passed a diktat on all banks not to transfer money in or out of digital currencies because there is no control of the Indian Government to regularise and monitor the digital currencies. However, very recently in Internet and Mobile Association of India v. Reserve Bank of India, Supreme Court of India held such diktat of RBI as unreasonable and held it invalid, thus not binding on the banks.  This challenges the jurisdiction of RBI law such as Foreign Exchange Management Act, 1999, because these technology-based advancements are yet to be dealt fully with by the Indian Courts. The principles of various laws in the wake of e-commerce are not settled yet.

Example:  Consider a person disguised as a buyer transfers a sum of money using the Bitcoin to a seller abroad to showcase an E-commerce activity which in fact is a mode of some money laundering activity.  This is a very difficult and cumbersome case for the law enforcement to establish the evidence before the court the law and quite expensive to prosecute the offenders under the Prevention of Money Laundering Act, 2002.  

Conclusion

One of the challenges that have been existing for a long time in the cross-border trade is that each nation does not want to lose or surrender its identity to another nation, and make its laws subservient to the laws of other nation. The same psychology extends into e-commerce when there are cross-border disputes. The various treaties between the nation and resolutions of the World Trade Organization may ease the process to help meet ends of justice; however, e-commerce is a relatively emerging marketplace and the laws and regulations are behind the curve in dealing with cross-border issues. For the domestic e-commerce, there are sufficient laws present in India except in few jurisdictional issues when there is a shift from “in rem” to “in personam” jurisdiction such as when e-commerce involves disputes related to infringement of intellectual property rights. There is a need for enactment of statute in India based on the theories like “minimum contact” and “long arm statute” of the United States of America.

References

• http://docs.manupatra.in/newsline/articles/Upload/FE4BA350-DBEF-49DA-97D4-09E54ED8B813.pdf 
• www.cis-india.org  
• SCC online
• https://indiankanoon.org

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