India: Data Protection In India

Last Updated: 10 October 2018
Article by Nirvaan Gupta

The 21st century has been described as the 'information age' due to the extensive use of information and almost everyone is constantly connected to the internet. The analysis of large and complex sets of data has become a specialized science called 'Big Data' analytics providing never before insights to alleviate societal problems relating to areas such as health, food security, transport and urban planning. Governments of the day are launching specialised programmes focused on this digital revolution, like the one launched by the Government of India called 'Digital India' initiative.

Both the public and the private sector are engaged in amassing personal data which seems to be generated ceaselessly. While there are justifiable uses that are vastly beneficial, such centralization of data, profiling of individuals and increased surveillance, has led to concerns relating to erosion of privacy of individuals, ability to impact public decision-making process and national security.

Various countries have been over the years trying to formulate strategies to counter or control the negative affects of this digital aggregation. The EU has adopted a rights-based approach to privacy where personal privacy of an individual is the central pillar of the protection regime. The US being a laissez faire culture, has mainly focused on individual's right to be left alone by the State and thus the legislations have been regarding personal information being processed by the government, where processing of personal information by the private sector has been left open through a notice and choice model. China on the other hand has adopted a centrally dominant model where personal information has been perimetered within the country through legislation on grounds of national security.

Existing data protection framework in India

In India too the digital era has triggered concerns about data protection. For mitigating against privacy concerns and national security concerns, the Indian legislature and governments have over the years passed some specific laws in this regard:

1. General Application: Information Technology (Reasonable Security Practices and Sensitive Personal Data or Information) Rules, 2011
2. Govt. Collection of Data: Aadhaar (Targeted Delivery of Financial and other Subsidies, Benefits and Services) Act, 2016; Aadhaar (Data Security) Regulations, 2016
3. Banking Sector: Credit Information Companies (Regulation) Act, 2005; Credit Information Companies Regulations, 2006; circulars of Reserve Bank of India including KYC circulars; Master Circulars on credit cards, etc.; Master Circulars on Customer Services; Code of Bank's commitment to Customers
4. Telecom Sector: Unified License Agreement issued to telecom service providers by the Department of Telecommunications; Telecom Commercial Communication Preference Regulations, 2010
5. Healthcare Sector: Clinical Establishments (Central Government) Rules, 2012; Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002

It may appear that the aforesaid data protection regime in India is similar in scope to the US data protection regime as it is applicable to specific sectors with a target audience. Having said that, the core differentiator is the fact that in the US the data protection laws are focused on 'protection from the State' and mostly do not have an application relative to the private sector, while in India, such a distinction is not present and the principle driver seems to be protection of data simpliciter being equally applicable to public and private sector.

Need for revamping the data protection framework in India

While the aforesaid specific legislations exist, the complexity, dynamism and all-encompassing reach of the digital revolution require a far more comprehensive regulatory regime to mitigate the concerns that are ever present.

Essentially, it appears that there were three main drivers for revamping the existing data protection framework in India:

  1. Justice Puttuswamy judgment: A nine -judge bench of the Supreme Court of India delivered a landmark judgment in the case of Justice K.S. Puttaswamy (Retd.) v. Union of India & Ors. 2017 (10) SCALE 1, wherein it was held that the right to privacy is an intrinsic part of the fundamental right to life and personal liberty under Article 21 (in particular and in all fundamental rights in Part III which protect freedoms in general) of the Constitution of India. It was held that the Constitution of India must evolve with the circumstances of time to meet the challenges thrown up in a democratic order governed by the rule of law and that the interpretation of the Constitution of India cannot be frozen on the perspectives present when it was adopted. The Supreme Court acknowledged that the concept of the right to privacy has evolved from the basic right to be let alone, to a range of negative and positive rights. The Court recognised 'informational privacy' as an important aspect of the right to privacy that can be claimed against state and non-state actors, but such a right is not an absolute right and may be subject to reasonable restrictions. Further, the Court has laid down a test to limit the possibility of the State clamping down on the right, i.e., such an action must be sanctioned by law, it must be necessary to fulfil a legitimate aim of the State, the extent of the State interference must be 'proportionate to the need for such interference' and there must be procedural safeguards to prevent the State from abusing its power.
  2. State's duty to protect national security: India is a vast country with multiple cultures, religions and linguistic diversity and such diversity presents its own challenges for the State. This is further complicated by its geo-political location, due to which India has ranked third on the list of countries suffering from terror attacks. For tackling the internal and external security challenges, the State necessarily needs to have the ability to engage in real-time surveillance of its data subjects if the need arises. For such surveillance to be effective, the State must have the ability to access the data centres, however, in today's digital world, the physical site of the data may be outside India.
  3. India's prowess in IT enabled services: India had a 55% share of the US$185-190 billion global outsourcing business in FY18. With the advent of the General Data Protection Regulation in the EU w.e.f. May 25, 2018, transfer of data from the EU to another non-EU country will need to pass either (i) the adequacy test, or (ii) be in accordance with standard contractual clauses offering enough safeguards in relation with the data. Although, the transfer of data from EU nations at present is being undertaken under the standard contractual clauses, due to the sheer size of economic activity and the pervading global protectionist environment, a view may be taken that India's data protection regime is not in sync with the EU requirements despite the contractual clauses being in place citing difficulty in enforcing the contractual clauses in absence of a regulatory framework. This threat is mitigated if India fulfils the adequacy test, i.e., India has adequate level of data protection framework in place. For this test, the European Commission will examine the data protection rules in place in India, data protection rights and their effective administration, data protection authority, powers vested with such authority, international commitments with regard to data protection and a periodic review of the aforesaid criteria. In the present list of countries determined to be 'adequate', India does not figure, however, countries like Argentina, Canada, Israel, Isle of Man, New Zealand and the United States have been determined as 'adequate'. Accordingly, it may be strategically prudent for India to bring its own regulatory framework on data protection in line with the EU (which has been trail-blazing the global data protection practices).

Proposed data protection framework for India

The Government of India constituted a committee, chaired by Justice Srikrishna (retired), Supreme Court of India in August 2017 to design and draft data protection laws for India. The committee after a year of deliberations and public consultations has released a draft bill titled 'The Personal Data Protection Bill, 2018' (Draft Bill). The Draft Bill will now be discussed in both houses of the Parliament of India before it is passed and adopted with modifications as deemed fit.

Salient features of the Draft Bill have been set out below:

Data principal
  • Only natural persons (not restricted to Indian citizens)
Data fiduciary
  • Private entity or public entity or individual who determines the purpose and means of processing of personal data
Data processor
  • Private entity or public entity or individual who processes personal data on behalf of data fiduciary (not an employee of data fiduciary)
Two types of personal data
  • 'Personal Data' and 'Sensitive Personal Data'
  • Personal Data has been defined to mean data relating to natural person, who is directly or indirectly identifiable, having regard to any characteristic, trait, attribute or any other feature of the identity of such natural person
  • Sensitive Personal Data has been specifically defined to include, inter alia, passwords, financial data, health data, biometric data, genetic data, etc.
Applicability
  • To data fiduciary or data processor in relation with personal data (not applicable on anonymised data or non-personal data)
Territoriality
  • Extra-territorial in operation and is not restricted to Indian entities
  • Test is 'connection with any business carried on in India' or 'systematic activity of offering goods or services to data principals within India' or 'connection with activity which involves profiling of data principals within India'
Exemptions
  • Security of the State; Prevention, detection, investigation and prosecution of contraventions of law; Processing for legal proceedings; Research, archiving or statistical purposes; Personal or domestic purposes; Journalistic purposes; Manual processing by small entities have been exempted from the application of the Draft Bill
Obligations of data fiduciary/ data processor
  • Fair and reasonable processing
  • Lawful processing
  • Purpose limitation
  • Collection limitation
  • Data quality
  • Data storage limitation
  • Accountability
  • Notice to data principal
Grounds for processing personal data
  • Consent – free, informed, specific, clear and capable of being withdrawn
  • Functions of the State
  • Compliance with law or orders of court
  • For prompt action
  • For employment
  • For reasonable purposes
Grounds for processing sensitive personal data
  • Explicit consent
  • Similar to grounds for processing personal data
Personal data of children
  • Safeguards for processing personal data of children
Rights of Data Principal
  • Right to confirmation and access
  • Right to correction
  • Right to data portability
  • Right to be forgotten
Transparency and accountability measures
  • Privacy by Design
  • Personal Data Breach notification
  • Security Safeguards
  • Data Protection Impact Assessment
  • Record keeping and Data Audits
  • Data protection officer
  • Classification of data fiduciaries as significant data fiduciaries
Transfer of personal data outside India
  • Data localization by keeping one copy of personal data in India
  • Critical personal data (as notified) to be only processed in India
  • Personal data other than critical data may be transferred outside India on the basis of approved contractual clauses or to countries approved by the Indian regulator
Data protection authority
  • Dedicated regulatory authority to be established to monitor implementation of the data protection obligations
Remedies
  • Heavy penalties extending up to INR15 Crores (approximately USD 2,143,000) or 4% of total worldwide turnover of preceding FY
Transitional provisions
  • Notified data to be within 12 months from the date of enactment
  • Most provisions to be in force within 18 months from the notified date

The Draft Bill when implemented will require the enterprises to revisit their policies regarding data protection and processing. But most importantly, enterprises will be required to revisit their IT design and infrastructure to comply with the requirements of the Draft Bill, which will lead to significant increase in cost of doing business in India. It is estimated that data protection regimes will dampen the gross domestic product of the nation where being implemented by a significant percentage.

Implementation of the new framework on data protection is already a necessity because the ball has been set rolling by the EU, however, a balance needs to be achieved in protecting privacy without throttling the economic juices. It is thus suggested that in addition to laying out the theoretical framework, the regulatory authorities, should also actively engage with various OEMs and technical solution providers to make available off-the-shelf solutions for enterprises, big and small, so that the implementation is not challenging and cost efficient.

* For a critical review of the Draft Bill and the key challenges that it may face, please stay tuned for Part 2 of this article.

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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