India: Data Protection In India - Part II

Last Updated: 21 February 2019
Article by Nirvaan Gupta

Aristotle famously said that 'well begun is half done'.

The present dispensation has moved with alacrity on the topic of data protection especially since Justice Puttuswamy's judgment and GDPR having gone live. There is also a heightened concern regarding national security with the recent developments of Marriot data theft and Huawei controversy. The need of having this protective regime in place is not lost on anyone.

The present Draft Bill and the implementation thereof, both, have areas of concern and challenges to surmount. Given the significance of the proposed law, necessary calibration to address the concerns/ challenges ought to be undertaken before the Draft Bill is finalized and made into law.

Challenges in the proposed data protection framework for India

These can be classified into two broad areas, firstly, the challenges faced in creating an ecosystem wherein data protection is understood, implemented, complied with and monitored, and lastly, the areas of key concern in the Draft Bill.

Challenges re: Ecosystem

  • Awareness of concept:

    The proposed data protection framework would apply to (i) collection or processing of personal data within India, (ii) processing of personal data by State, Indian company, Indian citizen or like, (iii) processing of personal data by data fiduciaries or data processors not present in India, provided there is a connection with business carried on in India, or systematic activity of offering goods or services to data principals in India, or is a connection with activity involving profiling of data principals within India.

    The applicability of the Draft Bill is inclusive and thus is based not only on the concept of territoriality but also on the basis of nationality.

    Barring a few exceptions, almost everyone is liable to be a data principal or a data fiduciary if not a data processor. Given the broad-brush application of the proposed law, a robust and continued awareness campaign ought to be run to acquaint people with the law such that people become broadly aware of both, their rights as a data principal, and their obligations as either a data fiduciary or a data processor.
  • Getting people on board with the idea:

    There is a continuous data feed about data principals. We live and function in a world dominated by mobile devices. These mobile devices on a continuous basis generate data points on data principals either in an automated manner or due to voluntary input of information by the data principals into the popular social media apps.

    This voluntary input of information is largely due to the novelty of sharing personal information to a wide base instantaneously that has been made available to data principals, hitherto not available earlier. There is also peer influence to contend with that pushes data principals to share their information on a voluntary basis. The lines are getting blurred at times on whether the occasion relating to which the information is being shared by a data principal is at least as important, if not more, than the act of sharing such information. This voluntary input of information has thus become a relevant mindset issue.

    On the other hand, the purists will argue that information free-flow was the marker on which internet had been founded, and thus if there is a voluntary or even involuntary free-flow of information, then it need to be not contained.

    The free-flow argument, notwithstanding, since the advent of data analytics, the unseen power of this cumulative data footprint in the hands of few has been a prime reason for the present discussion around data protection. While, there are obvious benefits of data analytics to increase efficiencies and so on, the perverse use of its power also has been a recent bug-bear.

    Thus, the justifications for data analytics and the reasons why social media apps have been such a runaway success are at odd with the rights of data principals in the Draft Bill (like, right to confirmation, right to correction, right to data portability, right to be forgotten).

    The campaign for data protection rights thus will determine whether data principals buy into the idea of data protection just enough to ensure that social media apps, data analytics and data protection rights of data principals co-exist, or data principals are frenzied into self-preservation leading to massive restrictions on social media apps and data analytics.
  • Implementation of proposed data protection regime:

    Like always, implementation of this law will hold the key. We have already seen that even after eight years of notification in 2011 of personal data rules under the present Information Technology Act, 2000, the said rules are yet to be fully implemented.

    The broad applicability of the proposed law (as it also includes manual data processing in addition to automated/ computerized data processing) means that simple yet robust automated solutions (data management systems) should be conceptualized, developed, mass marketed and become readily available to the masses simultaneously with the coming into force of this proposed law. The privacy by design principle mandates that adequate changes to the IT architecture be made to ensure compliance. This proposition is difficult enough to plan, execute and maintain for large enterprises, let alone small and medium enterprises or individual citizens.

    Such data management systems being the repository of key business information will need adequate cyber security measures and redundancy backups to ensure data security and integrity.

    Only with an industry wide implementation of such systems, will the proposed law efficiently achieve its desired aim of providing protection to data principals and ensuring that data fiduciaries/ processors are compliant. Sans such systems, implementation of the proposed law may be akin to implementing GST without the technical solution backbone of GST Network (GSTN). The authorities need not and perhaps should not attempt to implement this through a centralized system as it will find huge resistance on grounds of snooping by the State. Instead what is required is that the authorities should prioritize the need and invigorate the market players to come up with technical solutions that could be adopted by data principals/ data fiduciaries/ data processors. Since this will be essential for implementation and the proposed law coming into force shall mandate compliance, sufficient regulatory oversight over pricing of such systems/ solutions ought to also be maintained.

    The proposed law will in the interim place heavy brakes on economic activity as due to the heavy penalty provisions, market players will look to implement solutions, redesign their systems, etc. With significant economic costs and political capital required to be expended by the Government on this proposed law, a well thought out implementation plan is sine qua non.

Key concerns in the Draft Bill

  • Consent:

    The "notice and choice" framework to secure an individual's consent is the basis for the concept of consent under the Draft Bill. However, given the experience of this model widely used over the internet, this model does not seem to work, as the consent terms are pre-determined, not amenable to any change, not understood by the consent provider, complex and involve legalese. Further, the consent terms mandate the consent provider to give the consent without which the activity cannot continue irrespective whether the consent is essential to the primary activity being sought by the consent provider. Rather than being autonomous, consent over internet has been called as 'Contract as Thing' by Arthur Leff in his seminal article.

    Accordingly, a lot of effort has been made by the draftsmen of the Draft Bill to attune 'consent' in a manner that it remains autonomous. The requirements prescribed are detailed and will mandate a data fiduciary to provide a detailed notice and future notices to the data principal. This is likely to raise significant cost and require onerous effort by the data fiduciary and data processor. While, it is paramount to keep consent autonomous, the effort on the part of data fiduciary/ data processor has to be also considered. Data management systems as referred to in Para A(3) above will be helpful in this regard.
  • Cross border data transfer:

    India's IT industry is a beneficiary of cross-border data transfer. The Draft Bill seeks to continue to enable this. On the flip side, there are arguments of data colonization by the western entities who largely thrive on subscription by Indian public. The perverse usage of such data set can lead to economic as well as strategic/ national security concerns. Western world continues to grapple with continued disclosures of data breach/ data misuse by major US IT players. There is a growing demand by domestic industry seeking data localization that ties-in with India's national security/ strategic concerns. China already is an outlier and has its domestic data fully ring-fenced within its borders. The major IT players (non-domestic) will have to significantly re-align themselves with a stringent data localization requirement, if such a requirement is finally enforced. We are already experiencing data localization requirements being mandated by certain sector regulators in India. Data management systems as referred to in Para A(3) above will be helpful in this regard also. If such data management systems are conceptualized and deployed then they may provide comfort to the authorities that the data set even though stored beyond the borders are still within the control and can be actively monitored.
  • Data Trust Score/ Compulsory Audits:

    This has been mandated by independent data auditors empaneled with the authority. Given the sour experience with rating agencies (on the financial side) in the recent IL&FS crisis and in the 2008 US meltdown, the rules framed for the empanelment should have onerous obligations and perverse implications on the auditors if such auditors fail to exercise due diligence and good judgement.
  • Biometric data:

    Inclusion of the term 'facial images' in the definition of biometric data may severely restrict common processing of photographs as such data set will be considered as 'sensitive personal data'. As photographs are commonly used, an exception for such usage ought to be brought out.
  • Small entities exception:

    Small entities have been exempted from the applicability of the Draft Bill. This definition may need to be adjusted to provide relief to a large section of society including individuals, at least in the initial phase of implementation.
  • Manual data included:

    Presently, processing of manual data is also included within the ambit of the Draft Bill. Given the magnitude of implementation, processing of manual data may be considered to be included within the scope of data protection law as phase two of the implementation process.
  • Data processor to pay for liability of data fiduciary:

    The Draft Bill provides that a data principal can institute a legal action against either data fiduciary or data processor and recover compensation from either of them in case of data breach. In case, data processor has no role to play in the breach event, then the data processor may recover in-turn from the data fiduciary. This may be sought to be limited only to scenarios where data processor has a role to play in the breach event.
  • Offences:

    The protection provided to the data principals is the prime purpose of the Draft Bill, and accordingly, the offences clause has been generously drafted in favour of the data principal. There exist pecuniary compensation limits and criminal punishment.

    As discussed above, a full implementation of the proposed law will prove to be difficult at the inception stages. The implementation will thus need to be planned in phases.

    Therefore, the penal provisions ought also be brought to life in a graduated manner to avoid harsh consequences during the implementation stages of data protection systems by organisations.
  • Industry specific concerns like fund industry:

    There are scenarios like fund industry where the data fiduciary will be the trust where the funds are pooled. However, the active management team of the fund is in a group entity. Thus, specific situational carve-outs may be required to address specific industry groups.
  • Timeline for implementation:

    Given the magnitude of activities required for implementation, sufficient time lines ought to be provided for all stakeholders to prepare.
  • Ambiguous and needs further clarity:

    There are many aspects in the Draft Bill that have been not spelt out and have been left to the authority to legislate upon. Many of these aspects require rigorous discussion by all stake holders before the Draft Bill is converted into law and are also required to plan for implementation. An early clarity on these will be essential.

    For example, standards for anonymization have not been specified, content requirements of privacy notices are subject to modification by authority without any reference to the basis for such changes, categories of personal data can be notified by authority, terms like 'important operations' and 'periodic' notifications which are used in the obligations of data fiduciary have not been defined or given guidance on, timeline for personal data breach notification, factors determining notification of personal data breach event have not been fully set, role and obligations of DPIA have not been fully clarified, etc.

    Aforesaid are some of the key concerns and challenges that face the Draft Bill.

Way Forward

We hope that more active participation of all stake holders with maximum induction of automated solutions be undertaken to weed out negative and unintended consequences of the proposed data protection law.

Fully modeling the new law on GDPR may not be advisable as it is a new experiment, and there can many chinks in its armour and many lessons to be learnt as it goes along.

India being a torch-bearer in the field of IT has the unique opportunity in trailblazing implementation of an efficient and automated data protection regime that can become a model for the rest of the world. With India's IT prowess, there lies tremendous business opportunity in getting this right!

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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