India: Cloud-Based Messaging Services In India: Data Security Obligations

Last Updated: 19 February 2016
Article by Suneeth Katarki and Namita Viswanath

'Cloud Computing' refers to internet based computing that allows access to a pool or network of computing resources that are owned and maintained by a third party via the internet. There is an emerging trend of smartphone companies in India operating a cloud-based messaging service which routes messages sent between service users via the internet instead of the telecom operator's SMS gateway. For instance, smartphone company Xiaomi Technology India Pvt. Ltd. operates the MIUI cloud messaging service and Apple India Pvt. Ltd. operates the iMessage service. Similarly, messaging service applications like WhatsApp also provide an alternative way for users to send video and text messages using an internet connection, instead of the traditional SMS. These cloud-based messaging services have certain inherent benefits that include bypassing a telecom operator's text messaging charges, permitting use even when the user is outside the home network of the telecom operator and does not have roaming services activated, indicating whether a message has been delivered or read, accessing the phonebook of a user to identify other users of the same cloud-based messaging services and enabling simultaneous delivery of a message to all devices configured to a single account. However, it has been noticed that in the course of providing this service, personal information such as the device's IMEI number, customer's phone number, phone contacts and text messages received from users is often shared with a server located in a foreign jurisdiction. There is hence a need for any company operating such cloud-based messaging services in India ("Company" or "Companies") to comply with the data security obligations imposed by law. In India there is no strong regulatory regime which exclusively deals with cloud computing or the legal issues attached to it. However, certain provisions of the Information Technology Act, 2000 ("IT Act") may be applied to cloud computing.

APPLICABILITY OF THE INFORMATION TECHNOLOGY ACT, 2000

Section 1(2) of the IT Act provides that it applies to the whole of India and to any offence or contravention thereunder committed outside India by any person, save as otherwise provided. Section 75 of the IT Act further elaborates that the Act applies to an offence or contravention committed outside India by any person without having regard to his nationality, if the conduct that amounts to an offence or contravention involves a computer, computer system or computer network located in India. A "computer network" means the inter-connection of one or more computers or computer systems or communication device through the use of satellite, microwave, terrestrial line, wire, wireless or other communication media, and terminals or a complex consisting of two or more interconnected computers or communication device whether or not the interconnection is continuously maintained.1 A "communication device" includes cell phones or any other device used to communicate, send or transmit any text, video, audio or image.2 The IT Act shall hence extend to any unauthorised or illegal access or misuse of personal information of the Company's' customers, whether within or outside the country.

DATA SECURITY OBLIGATIONS

The Ministry of Communications and Information Technology adopted the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011 ("Rules") under the IT Act. These Rules are applicable to any body corporate situated within India. Providers of information, as referred to in these Rules, are those persons who provide personal data or information to a body corporate. The Rules define personal information to mean "any information that relates to a natural person, which, either directly or indirectly, in combination with other information available or likely to be available with a body corporate, is capable of identifying such person" ("PI"). The Company is likely to have access to PI of its customers, like their phone numbers, device IMEI numbers and phone book, in the course of providing cloud-based messaging services, which shall be capable of identifying such customers. The Rules define sensitive personal information ("SPI") to include passwords received by a body corporate for processing, whether stored or processed under lawful contract or otherwise. A password is defined to mean "a secret word or phrase or code or passphrase or secret key, or encryption or decryption keys that one uses to gain admittance or access to information." Therefore, SPI would include, for instance, the password used by Company's customers to gain access to the cloud-based messaging service. The obligations of Companies operating cloud-based messaging services under the Rules can be divided into the following sub-heads:

Obligations relating to Handling of Personal Information including Sensitive Personal Information:

The Rules impose the following obligations on a Company dealing with PI, including SPI:

  1. The Company is required to provide a privacy policy for handling any PI including SPI and ensure that the same is made available to the customers who have made the information available under lawful contract ("Customer"). Such policy is also required to be published on the website of the Company.
  2. The policy is required to contain:

    1. clear and easily accessible statements of its practices and policies;
    2. type of personal or sensitive personal data or information collected;
    3. purpose of collection and usage of such information;
    4. disclosure of information including sensitive personal data or information; and
    5. reasonable security practices and procedures.
  3. The Company is required to take reasonable measures to ensure that the Customer has knowledge of:

    1. the fact that the information is being collected;
    2. the purpose for which the information is being collected;
    3. the intended recipients of the information; and
    4. the name and address of the agency that is collecting the information and the agency that will retain the information.
  4. The information collected is required to be used for the purpose for which it was collected.
  5. The Company is required to permit the Customer, on request, to review the information provided and ensure that any PI or SPI found to be inaccurate or deficient is corrected or amended as feasible.
  6. The Company is required, prior to the collection of PI or SPI, to give the Customer an option to not provide the information sought to be collected. The Customer shall also have the option to withdraw its consent in writing to the Company, while availing the services. However, in case of exercise of either option by the Customer, the Company shall have the option to not provide goods or services for which the said information was sought.
  7. The Company is required adopt reasonable security practices and procedures that have a comprehensive documented information security programme, and information security policies that contain managerial, technical, operational and physical security control measures that are commensurate with the information assets being protected with the nature of business. Further, the Company's compliance with reasonable security practices and procedures is required to be certified or audited through an independent auditor, duly approved by the Central Government, at least once a year or as and when the Company undertakes significant upgradation of its process and computer resource.
  8. The Company is required to designate a grievance officer to redress the grievances of the Customers expeditiously but within one month from the date of receipt of grievance. The Company is also required to publish the name and contact details of such grievance officer on its website.

Obligations specifically applicable to handling of Sensitive Personal Information:

The Rules impose more stringent obligations on the Company while dealing with SPI. Accordingly, the Company is required to obtain written consent through letter, fax or email from the Customer providing the SPI regarding the purpose of usage before collection of such information and the Company is not allowed to publish such SPI. However, in the context of cloud-based messaging services, it is not practical, and often not possible, for Customers' consent to be obtained through writing for each instance of SPI use. The Department of Information Technology of the Ministry of Communications & Information Technology, Government of India, recognising this impediment issued a press release on August 24, 2011 stating, among other things that consent under the Rules for handling of the Customer's SPI includes consent given by any mode of electronic communication. Hence any web-based consent, including by way of acceptance of terms of use uploaded on the website of the Company, should satisfy the requirement of the Rules.

Further the Company is not permitted to collect SPI unless the collection is for a lawful purpose connected with the activity of the Company and is considered necessary for that purpose. The Company is also not permitted to retain the SPI for longer than is required for the purposes for which such information may lawfully be used or is otherwise required under law.

Prior to disclosure of the SPI to any third party, the Company is required to obtain prior permission from the Customer unless such disclosure has been agreed to in the contract with the Customer, is made pursuant to an order under law, is made in compliance with a legal obligation, is made to Government agencies mandated under law for the purpose of verification of identity, or for prevention, detection, investigation, prosecution, and punishment of offences. The Company is also required to ensure that the third party receiving the SPI from the Company shall not disclose it further.

Transfer Obligations:

Additionally, if the Company intends to provide its overseas servers with access to the SPI of its Customers, it will be considered as a "transfer" of information under Rule 7 of the Rules, to the entity owning the server in a foreign jurisdiction, and would have to be done under a contract. Rule 7 of the Rules permits transfer of SPI to a third party in any country, only if it is necessary for the performance of the lawful contract between the Company and the Customer or where the Customer has consented to such data transfer. But in this arrangement, it is mandatory that the third party receiving such information in a foreign jurisdiction ensures the same level of data protection that is imposed upon the Company under the Rules.

Obligations as an Intermediary:

"Intermediary" means any person who on behalf of another person receives, stores or transmits an electronic record or provides any service with respect to that record and includes telecom service providers, network service providers, internet service providers, web-hosting service providers, search engines, online payment sites, online auction sites, online market places and cyber cafes.3 Generally speaking, an intermediary is not liable for any third party information, data, or communication link made available or hosted by him.4 "Third party information" for the purpose of this proposition means any information dealt with by an intermediary in his capacity as an intermediary. However, such exclusion from liability of an intermediary is subject to two important qualifications.

  1. An intermediary has to meet the following criteria;

    1. the function of the intermediary is limited to providing access to a communication system over which information made available by third parties is transmitted or temporarily stored;
    2. the intermediary does not-(i) initiate the transmission, (ii) select the receiver of the transmission, and (iii) select or modify the information contained in the transmission; and
    3. the intermediary observes due diligence while discharging his duties under this Act and also observes such other guidelines as the Central Government may prescribe in this behalf.
  2. The intermediary does or omits to do (as the case may be) of any of the following:

    1. the intermediary has conspired or abetted or aided or induced whether by threats or promise or otherwise in the commission of an unlawful act, or
    2. upon receiving actual knowledge, or on being notified by the appropriate Government or its agency that any information, data or communication link residing in or connected to a computer resource controlled by the intermediary is being used to commit an unlawful act, the intermediary fails to expeditiously remove or disable access to that material on that resource without vitiating the evidence in any manner.

Given that most Companies operating cloud-based messaging services are involved in transmitting customer data to a third party server, Companies cannot escape liability as an intermediary, with respect to any customer data transmitted in the course of operating a cloud-based messaging service.

Hence, the Company as an intermediary, is required to comply with the Information Technology (Intermediaries Guidelines) Rules, 2011 ("Intermediaries Rules"). According to the Intermediaries Rules, the Company is required to publish the rules and regulations, privacy policy and user agreement for access or usage of the Company's computer resource5. Under such rules and regulations the Company is required to notify the users of its computer resource not to use, display, upload, modify, publish, transmit, update, share or store any information which:

  1. belongs to another person and to which the user does not have any right to;
  2. is grossly harmful, harassing, blasphemous defamatory, obscene, pornographic, paedophilic, libellous, invasive of another's privacy, hateful, racially or ethnically objectionable, disparaging, relating or encouraging money laundering or gambling, or otherwise unlawful in any manner whatever;
  3. harms minors in any way;
  4. infringes any patent, trademark, copyright or other proprietary rights;
  5. violates any law for the time being in force;
  6. deceives or misleads the addressee about the origin of such messages or communicates any information which is grossly offensive or menacing in nature;
  7. impersonates another person;
  8. contains software viruses or any other computer code, files or programs designed to interrupt, destroy or limit the functionality of any computer resource; or
  9. threatens the unity, integrity, defence, security or sovereignty of India, friendly relations with foreign states, or public order, causes incitement to the commission of any cognisable offence, or prevents investigation of any offence or is insulting any other nation.

Further, as per the Intermediaries Rules, the Company as an intermediary is required to comply with the following data security obligations:

  1. to inform users that non-compliance of the said rules and regulations, terms of use and privacy policy, may result in termination of the access rights of the users to its computer resources;
  2. to comply with the provisions of the IT Act and the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Information) Rules 2011;
  3. to take reasonable measures to secure its computer resource and information contained therein using reasonable security practices and procedures as prescribed under the Information Technology (Reasonable security practices and procedures and sensitive personal Information) Rules, 2011;
  4. to report occurrence of cyber security incidents to the Indian Computer Emergency Response Team, and share all information pertaining to such cyber security incidents with them;
  5. to not deploy or install or modify the technical configuration of any computer resource or become party to any such act which may change or have the potential to change the normal course of operation of such computer resource and information contained therein, with a view to circumvent law; and
  6. to appoint a grievance officer to redress all complaints within one month from the date of receipt of the complaint, and to publish his name and contact details on its website.

Obligations with respect to Data Encryption:

Since most cloud-based messaging services operated by Companies encrypt the data transferred via their cloud service, there could be a possible conflict with Department of Telecommunications' ("DOT's") efforts to regulate encryption of data transferred through internet service providers. The IT Act (Sec.84A), provides the Central Government with the power to set the nationally permitted standard for encryption. Pursuant to this, Section 2.2(vii) of the 'License Agreement for the Provision of Internet Service' ("ISP License") that is entered into between the DoT and the internet service providers (in the case of mobile internet, the telecom operator) for the provision of internet services in India, currently sets this limit at 40 bit (even though the ISP License is issued under the Telegraph Act, 1885 and not the IT Act). Additionally, the ISP License restricts internet service providers from employing bulk encryption of their networks, and requires that any individual or entity providing internet services using encryption over 40 bit must seek permission from the DOT and deposit the decryption key with the DOT. The internet service providers, are thus compelled to pass on their obligation to comply with the prescribed encryption level under their license to the Companies operating the cloud-based messaging service.

Hence, if the Company's cloud-based messaging service technology encrypts data transferred between its users, the Company shall be under an obligation to ensure that such encryption is within the prescribed encryption level. In the absence to do so, the Company shall be compelled to seek permission from and submit the decryption key to the DOT.

Further, the Department of Electronics and Information Technology, Government of India, had released a draft National Encryption Policy under the IT Act in September 2015, which required all Companies using encryption technology to provide a service in India to register themselves and execute an agreement with the Government to conduct business in the country. The Companies were required to use only encryption algorithms and key sizes prescribed by the Government from time to time. The customers of cloud-based messaging services provided by these Companies were required to store the plaintexts of all encrypted communication for ninety days from the date of transaction and provide the verifiable plain text to law and enforcement agencies as and when legally required. The draft policy resulted in a public uproar over threats to privacy. Moreover, its practical implementation was difficult given that the storage of data by customers will come at a cost. The draft policy was subsequently withdrawn by the Government.

CONCLUSION

With the growing number of cloud-based messaging applications and services, traditional text-based communications such as SMS have become a less preferred medium of communication. Cloud messaging offers the customers a greater scale of communication and unique specialised services in addition to text and video messaging. It is hence the need of the hour that the cloud-based messaging service providers place greater emphasis on their policies and practices, operating business model and contracting arrangements being compliant with all applicable data security obligations.

Footnotes

1. Section 2(j) of the IT Act.

2. Section 2(ha) of the IT Act.

3. Section 2(w) of the IT Act.

4. Section 79 of the IT Act.

5. Under Section 2(k) of the IT Act, a computer resource is any computer, computer system, computer network, data, computer data base or software. Section 2(j) of the IT Act defines a computer network to include the inter-connection of one or more cell phones.

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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