India: Indian Digital Economy Needs Clear Laws

Last Updated: 23 September 2015
Article by Sharanya G. Ranga and Pooja Thacker

There is no clarity in respect of most liability issues that could arise due to the dynamic nature of e-commerce.

An internet penetration of only 12%, yet India ranks third in the number of internet users, only to be surpassed by China and the US. E-commerce has seeped its way into our lives in an almost surreal manner—right from buying books, electronic gadgets, booking bus tickets and cabs, using a city-specific mobile application for local attractions, being connected online has become a way of life. Evolving consumer preferences and the convenience factor has ensured e-commerce business is here to stay. But does the existing legal framework in India accommodate the unique attributes of e-commerce businesses?

Click-wrap agreements like website terms and conditions act as a 'user agreement' (e-contract) that bind the user by its provisions. Not ticking the box to 'acknowledge that I have read and fully understand and accept the terms and conditions' in such click-wrap agreements is not really an option if a user desires to use/transact on the website. Some of these terms have multiple user consent authorising the merchant website to share personal information fed on their website with third-party service providers to facilitate their business. The user is never in a position to identify such third parties. In India, the Information Technology Act, 2000, deals with the concept of violation of privacy in a very limited sense (from a handling of data perspective). In the absence of a specific data protection legislation in India, what is the recourse available to a user whose information is misused by such third parties? How legally valid are the terms and conditions that you sign up to? Is an e-contract recognised in India?

The IT Act, largely based on the UNCITRAL model law on electronic commerce, provides that electronic contracts will not be unenforceable solely on the ground that they were entered into in an electronic form. It thus follows that e-contracts, like all other contracts, are governed by the basic principles of the Indian Contract Act, 1872, which mandates free consent, lawful consideration, lawful object and competency to contract. However, with an internet user base of over 300 million, it is virtually impossible to check the age of the person transacting online. The Supreme Court, in one of its judgments involving interpretation of an insurance policy, noted that in the case of dotted line contracts, the user mostly has to either accept the terms of the contract or forgo the service altogether. There is no occasion for the weaker party to bargain or to have equal bargaining power. Do such circumstances render online agreements unconscionable? In India, there does not seem to be a very well-developed jurisprudence on this issue.

E-commerce websites operating in India are 'intermediaries' as per the provisions of the IT Act. Intermediaries are persons receiving, storing or transmitting electronic records or providing any service in that regard. The IT Act has exempted intermediaries from any liability in respect of third-party information, data or communication link hosted by it. To that extent, an intermediary may lawfully exclude his liability. This only means that prevailing laws permit a website to exclude any liability which it may incur by reason of its users clicking on an advertisement (third-party link) on its website and using such product (governed by third-party website). However, there is no clarity in respect of other liability issues which may arise given the dynamic nature of e-commerce business.

In the recent Uber case in Delhi, disclaimers made in respect of independent third-party transportation and logistics providers in the website and mobile application policies of Uber Technologies did not help it withstand a national outrage that involved a rape case by a cab driver contracted by Uber.

E-commerce companies generally adopt a marketplace model offering a platform connecting buyers and sellers. In such a 'facilitatory' role, liability of the e-commerce company is limited to the point of disclaiming all liabilities in respect of the product quality, creditworthiness, salability, etc, as its products are sourced from third-party sellers. They, however, also have consumer-friendly return and refund policies. While an aggrieved user may not stand a chance to recover consequential or incidental damages, she may choose to return the product and get a full refund if she is unhappy with the product for any reason. There is an increasing need to address this position by amending the Consumer Disputes Act, 1986, which does not address the role played by online marketplaces and evolving forms of service providers.

In the absence of distinct e-commerce legislation in India, such businesses are currently governed by multiple laws such as IT Act, Indian Contract Act, Companies Act, 2013, Indian Penal Code, 1860, as also other taxation, intellectual property and employment laws. The need of the hour is legislation that is in tune with the changing dynamics of the globalised digital economy.

Originally published in The Financial Express, Wednesday, Sep 23, 2015

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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