This article has been written by Manisa Saha pursuing a Diploma in International Contract Negotiation, Drafting and Enforcement from LawSikho.

This article has been edited and published by Shashwat Kaushik.

Introduction 

In this fast pace field of technological developments, all aspects have transitioned into the digital sphere. The rise of new innovations and technology has greatly boosted online transactions, which led to the transfer of online payments and the sharing of documents. Nowadays, documents are shared through email. These emerged the need to sign documents in a new mode, which can be referred to as a digital signature.

A digital signature is a complex process as it uses a cryptographic method where a pair of keys are used to verify and protect the documents. Here, both the signer and the receiver must have a digital certificate and that digital certificate needs to be issued by the Certificate Authority. Due to the proliferation of digital signatures, various organisations and industries are implementing them in various sectors as they consider the process of digital signatures to be more secure and convenient. Furthermore, digital signatureshaves increased the transparency of online interactions and have also developed a relationship of trust between customers, business partners and vendors. 

What is digital signature

A digital signature is a type of electronic signature that is used to check the authenticity and integrity of digital messages and documents. This method ensures that the information that has originated with the signer is not altered in transit. It intends to control and solve the problem of tampering and impersonation in digital communications.

According to Section 2(1)(p) of the Information Technology Act of 2000 digital signature means authentication of any electronic record by a subscriber by means of an electronic method or procedure in accordance with the provisions of Section 3.

Digital Signature is considered to be the electronic version of the handwritten signature or stamped seal. The digital signature uses an asymmetric key cryptography which requires two keys.i.e. Public and private keys to encrypt and decrypt data. The purpose of a digital signature is to secure and authenticate the document electronically so as to identify the signer and to make it binding on persons putting digital signatures and to achieve enforceability against the defaulting party.

Features of digital signature

Digital Signature offers several key features that enhance security and efficiency in digital transactions. These features include:

• Authentication: It confirms the identity of the Signer by providing assurance that the document was signed by the claimed individual.
• Integrity: A digital signature ensures that the document has not been tampered with during transmission. Even any modification in the document after signing would invalidate the signature.
• Non-repudiation: The sender cannot deny the signature that he has signed digitally in the document as it has been mathematically tied to the private key.
• Security: It uses cryptographic algorithms to secure the signing process.
• Efficiency: A digital signature is efficient and can be used to sign electronic documents quickly. There is no need for physical paperwork.

Documents on which digital signature is invalid

For a contract to be binding and enforceable in court under Indian law, it should be in writing and adequately stamped. However, there are certain instruments that cannot be entered electronically and that do not apply to the IT Act. These instruments are listed below: –

• A negotiable instrument (other than a cheque) as defined in Section 13 of the Negotiable Instruments Act of 1881.
• A power-of-attorney as defined in Section 1A of the Powers-of-Attorney Act of 1882.
• A trust deed as defined in Section 3 of the Indian Trust Act of 1882.
• A will is defined under Section 2(h) of the Indian Succession Act, 1925.
• Any contracts for sale or any other kind of transfer of interest in immovable property. 

E-contracts in India

In India, the legality and enforceability of electronic contracts, also known as e-contracts, are governed by the Information Technology Act, 2000 (IT Act). The IT Act provides a legal framework for the formation and execution of e-contracts in India.

Here are some key aspects of e-contracts in India:

1. Formation of e-contracts:
   • An e-contract is formed when an offer is made electronically and accepted electronically.
   • The offer and acceptance can be expressed through emails, website forms, or other electronic means.
   • The terms and conditions of the e-contract can be agreed upon electronically, and there is no requirement for a physical signature.
2. Validity of e-contracts:
   • E-contracts are legally valid and enforceable in India under the IT Act.
   • Electronic signatures are recognized as legally valid under the IT Act.
   • An electronic signature can be a digital signature, a password, or any other method that identifies the signatory and indicates their consent to the e-contract.
3. Requirements for enforceability:
   • An e-contract must meet the following requirements to be legally enforceable:
     • There must be a clear and unambiguous offer and acceptance.
     • The parties involved in the e-contract must have the legal capacity to enter into a contract.
     • The terms of the e-contract must be lawful and not against public policy.
     • The e-contract must not be entered into under duress, undue influence, or fraud.
4. Execution of e-contracts:
   • E-contracts can be executed in India by using various electronic means, including emails, website forms, or electronic document signing platforms.
   • There is no requirement for a physical contract to be printed, signed, and exchanged.
   • Electronic records, such as emails, website clicks, and digital signatures, are admissible as evidence in court to prove the existence and terms of an e-contract.
5. Consumer protection in e-contracts:
   • The Consumer Protection Act, 2019 provides additional protection to consumers who enter into e-contracts.
   • Consumers have the right to receive information about the goods or services they are purchasing online, including the price, delivery charges, warranty, and refund policy.
   • Consumers also have the right to cancel an e-contract within a specified period.

Kinds of e-contracts in India

Electronic contracts, also known as e-contracts, are legally binding agreements formed between two or more parties through electronic means, without the need for physical signatures. India has embraced e-contracts, recognizing their validity and enforceability under the Information Technology Act, 2000. Here are the different kinds of e-contracts prevalent in India:

1. Clickwrap agreements:

• These are contracts formed when a user clicks on an “I agree” or “Accept” button on a website or software installation.
• By clicking, the user signifies their consent to the terms and conditions of the agreement.
• Common examples include website terms of use, software license agreements, and online shopping terms.

2. Browsewrap agreements:

• These are contracts formed when a user accesses a website or uses a software without explicitly clicking on an “I agree” button.
• The terms and conditions are usually displayed on the website or within the software.
• By continuing to use the website or software, the user is deemed to have accepted the terms.
• Browsewrap agreements are less common and may not always be legally enforceable.

3. Shrinkwrap agreements:

• These are contracts formed when a user purchases a software or product that comes with a license agreement.
• The terms and conditions are typically enclosed in the packaging of the product or software.
• By opening the packaging or installing the software, the user is deemed to have accepted the terms.
• Shrinkwrap agreements are common in software licensing.

4. E-sign agreements:

• These are electronic contracts that are signed using digital signatures.
• Digital signatures are electronic equivalents of handwritten signatures and are legally recognised in India under the Information Technology Act.
• E-sign agreements provide a higher level of security and authenticity compared to traditional paper-based contracts.

5. Mobile app agreements:

• These are contracts formed when a user downloads and installs a mobile app.
• The terms and conditions of the agreement are usually displayed during the installation process or within the app itself.
• By using the app, the user is deemed to have accepted the terms.
• Mobile app agreements are increasingly common as more and more businesses offer mobile apps for their products and services.

6. Electronic Data Interchange (EDI) agreements:

• These are electronic contracts formed between businesses that exchange data electronically, such as purchase orders, invoices, and shipping notices.
• EDI agreements are typically governed by industry standards and are legally enforceable.

7. Government e-contracts:

• These are electronic contracts entered into by government agencies with businesses or individuals.
• Government e-contracts are subject to specific regulations and procedures laid down by the government.

8. Smart contracts:

• Smart contracts are self-executing contracts written in code and stored on a blockchain.
• They automatically execute the terms of the contract when certain conditions are met.
• Smart contracts are still in their early stages of development and adoption in India.

The enforceability of e-contracts in India is governed by the Information Technology Act, 2000, as well as the Indian Contract Act, 1872. E-contracts must meet certain legal requirements to be valid and enforceable, such as the parties’ consent, consideration, and legality of the purpose.

E-contracts offer several advantages over traditional paper-based contracts, including convenience, speed, and cost-effectiveness. However, it is essential to exercise caution when entering into e-contracts, as there may be risks associated with electronic transactions.

Benefits of digital signature for contracts

Digital signature offer the following benefits:

Saves time and cost

A digital signature helps us save time and money by signing documents and contracts with just a click of a button. This system enables us to instantly sign and deliver the documents, expediting business operations more efficiently. It eliminates the need for physical paperwork and reduces administrative tasks.

Enhanced security

A digital signature provides high-level cryptographic techniques to secure the integrity and authenticity of a document. This reduces the risk of tampering or fraud, ensuring that the document that has been signed remains unchanged throughout its lifecycle. The level of security is such that if any unauthorised changes are made, they are detectable.

Better efficiency

Digital signatures have made the signing and verifying process simpler and faster. It has eliminated the need for physical paper-work saving time and resources. This agility is very valuable in this fast-paced business environment.

Reduction in environmental impact

By reducing paper consumption, digital signatures have made a positive environmental impact. As a result, businesses can decrease their carbon footprints and minimise waste generation, thereby promoting sustainable practices and contributing towards a greener planet.

Global accessibility

Digital signatures facilitate remote collaboration, enabling individuals to collaborate on documents irrespective of their physical location. Signatories can sign the documents from anywhere in the world and they do not need to be physically present to do so. This is particularly beneficial for businesses with international clientele.

Audit trail

Digital Signature has built-in audit trail features that record who signed a document, when they signed it and any modifications made after signing. This creates transparency and accountability and helps to resolve disputes quickly.

Demerits of digital signatures

While digital signatures offer several benefits, there are also a few demerits associated with their use:

1. Reliance on technology: Digital signatures rely heavily on technology, which poses a risk of security breaches in the event of a system failure or a cyberattack. If the security of the digital signature system is compromised, the integrity of the signed documents can be jeopardised.
2. Potential for errors: During the creation of a digital signature, there is a possibility of errors, such as selecting the wrong key or signing the incorrect document. These errors can render the digital signature invalid and affect the legal validity of the document.
3. Complexity for non-technical users: Understanding the technicalities of digital signatures and their verification process can be challenging for individuals who are not tech-savvy. This complexity may make it difficult for some users to adopt and effectively utilise digital signatures.
4. Legal recognition and enforceability: The legal recognition and enforceability of digital signatures vary across jurisdictions. While many countries have enacted laws that grant legal validity to electronic signatures, there may be specific requirements or limitations regarding the use of digital signatures in certain contexts.
5. Revocation challenges: Revoking a digital signature can be a complex process, especially if the private key used for signing has been compromised or lost. In such cases, there may be difficulties in invalidating the digital signature and preventing its continued use.
6. Potential for forgery: While digital signatures provide a high level of security, there is still a risk of forgery. Sophisticated attackers may use advanced techniques to create counterfeit digital signatures, which could undermine the trust and integrity of the digital signature system.

It’s important to note that while these demerits exist, digital signatures remain a valuable tool for ensuring the authenticity and integrity of electronic documents. By implementing robust security measures, following best practices, and staying informed about technological advancements, organisations and individuals can mitigate the risks associated with digital signatures and utilise them effectively.

Is digital signature legally valid in india

Digital signatures are legally valid in India and are recognised under the Information Technology Act of 2000. Under this Act, the validity of a digital signature has the same legal standing as a traditional signature on physical documents. This authentication process enhances security and reduces the risk of fraud, thereby fostering trust in electronic transactions.

The Information Technology Act of 2000 (IT Act) recognises electronic documents with digital signatures as legally valid and can be used as evidence in court. Some of the main clauses that pertain to the legality of digital signatures in court under the IT Act are listed below: –

Section 4 of the IT Act establishes a presumption of authenticity for electronic records signed with a digital signature, stating that when an electronic record is authenticated using digital signature then that electronic record that contains the document must be duly signed by the person who owns that signature, unless stated otherwise.

Section 65B of the Indian Evidence Act of 1882 allows electronic documents and digital signatures as evidence in court.

For a valid digital signature, Digital Signature Certificates (DSCs) are required and it needs to be issued by the licensed Certifying Authorities. Additionally, that licensed Certifying Authority must have a validity period and it must be used within the specified time frame. Section 35 of the IT Act outlines the legal requirements for Digital Signature Certificates and Certification Authority.

Section 43A of the IT Act establishes that if a certification authority messes up and issues false certificates, they can be held responsible.

From the above discussion, it can be assumed that if the digital signatures meet the legal standards and follow the rules, then they will be accepted as evidence in court with a presumption of validity for electronic records.

Evidentiary value of e-signature under Indian Evidence Act of 1872

The Indian Evidence Act, 1872 (IEA) is a comprehensive law governing the admissibility and evaluation of evidence in legal proceedings in India. It plays a crucial role in determining the evidentiary value and legal validity of electronic signatures (e-signatures).

IEA and e-signatures

• Section 3 of the IEA defines “evidence” as any statement that a court permits or requires to be made before it by witnesses, in relation to matters of fact under inquiry. This broad definition encompasses electronic records, including e-signatures, as potential forms of evidence.
• Section 4 of the IEA deals with the admissibility of evidence. It states that all evidence may be given orally, by writing, or by electronic means. This provision explicitly recognises the admissibility of e-signatures in electronic form.
• Section 65B of the IEA specifically addresses the evidentiary value of electronic records. It states that a secure electronic record is admissible as evidence and has the same evidentiary value as a paper document. This provision provides a strong legal basis for considering e-signatures as reliable and trustworthy evidence.

Evidentiary considerations for e-signatures

• Authentication: The authenticity of an e-signature is critical to its evidentiary value. Courts consider various factors to determine the authenticity of an e-signature, including the security measures employed, the verification process used, and the signer’s intent to be legally bound by the signature.
• Integrity: The integrity of an e-signature refers to its unaltered state. Courts evaluate the integrity of an e-signature by examining the presence of any unauthorised modifications or tampering with the electronic record.
• Relevancy: The relevance of an e-signature to the matter under inquiry is also crucial. Courts consider the purpose and context of the electronic record to determine whether the e-signature is relevant to the issues being adjudicated.

Evidentiary weight of e-signatures

The evidentiary weight accorded to e-signatures is generally comparable to that of traditional handwritten signatures. However, the evidentiary strength of an e-signature may vary depending on the specific circumstances of the case and the factors mentioned above.

Legalities for creating a valid digital signature

Section 15 of the Information Technology Act of 2000 lays down certain guidelines for creating a valid and secured digital signature. At the time of fixing a digital signature, the following things need to be fulfilled:

1. It should be unique.
2. It should be capable of identifying all the parties or subscribers to the electronic document.
3. It should be linked to the electronic record in such a manner that if someone tries to change the document after it has been signed, then the digital signature would become invalid.

Landmark cases relating to digital signature

• In the case of State Bank of India vs. Ajay Kumar Sood, the hon’ble Supreme Court observed that judgements should be accessible to individuals from all sections of society, including persons with disabilities. Additionally, the court emphasised the necessity of using digital signatures rather than scanned versions of printed copies while signing judgements.
• The Supreme Court in the case of Trimex International FZE Ltd. Dubai vs. Vedanta Aluminium Ltd. (2010) held that the terms of the agreement that have been agreed to through emails constitute a valid contract under the Indian Contract Act, 1872. Further, in the absence of the signed documents, once the contract is concluded orally or in writing, a formal contract that has been prepared and initiated by the parties will not affect the contract. Emails that have been exchanged between the parties would serve as an adequate means for approval and acknowledgement since they provide a record of the agreement.
• In case of Tamil Nadu Organic Pvt. Ltd. vs. State Bank of India (2014), the Madras High Court held that contractual obligations can indeed be formed electronically and are legally enforceable. Here, the court emphasised the significance of digital signatures as outlined in Section 3 of the IT Act for authenticating electronic records. Additionally, Section 10A of the IT Act was cited to underscore the validity of electronic records and means of concluding agreements and contracts.

Conclusion

The digital signature has emerged as a powerful tool and has expanded drastically by transforming businesses and eliminating geographical barriers. The use of digital signatures has taken the place of handwritten signatures by minimising paperwork and boosting productivity. It has streamlined the process of entering into agreements by providing ease of convenience, efficiency, and security from third-party interference. Various sectors like HR, governments, cryptocurrencies, financial institutions, healthcare, and more are utilising digital signatures as they consider them to be more trustworthy and cost effective. Thus, the pervasive nature of digitalization in this contemporary society needs to be adopted by everyone so as to prevent obsolescence.

References

1. https://www.khuranaandkhurana.com/2021/03/31/validity-of-digital-signatures-in-india/
2. https://www.lawyersclubindia.com/articles/validity-of-digital-signatures-under-the-information-technology-act-2000-15846.asp
3. https://www.edrafter.in/validity-of-digital-signature/
4. https://www.zoho.com/contracts/digital-signature-for-contracts.html
5. https://www.researchgate.net/publication/372164859_Laws_Governing_Digital_Signature_in_India_An_Overview
6. https://www.brainboosterarticles.com/post/validity-of-digital-signatures-under-contracts-in-india