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Digital Signature – validity in India

By Achyutha Bharadwaj,  Flywork.io Team, Flywork.io.

At this time of lockdowns and restrictions, as traditional ways of executing documents is getting more and more difficult, the significance of digital signature increases. Is digital signature recognized under Indian Law? Can all documents be executed using digital signatures? Read on to find the answers.

Almost every business entity has been digitized, people are shopping online more often than in malls, this creates a question in the mind whether signing of cheques and other official documents can be done online as well. The answer is yes. With so many start-ups coming up, the technological and commerce industry is growing rapidly and this raises the need to make it convenient for individuals, companies, etc. to fulfill and execute contracts with just the use of their fingertips. This has been made possible by the Information Technology Act, 2000 (“IT Act”) along with a couple of other legislations, in the form of digital or electronic signatures (e-signatures). A digital signature is simply an alternative way for a user/subscriber to authenticate any electronic record, through either an e-signature or any other authentic electronic technique. 

Digital signatures, which are viewed as a subset of electronic signatures, are liked for certain business/organisational exchanges, for example, e-documenting with the Ministry of Corporate Affairs, and merchandise and administration charge filings. The Second Schedule of the IT Act has incorporated a method for electronic authentication through the electronic signatures and it also helps determine Aadhar e-KYC (Know your Customer) authentications as an electronic authentication method and strategy. A lot of banks and financial institutions are using online methods for verification of the customer – e-signatures become very necessary in order to authenticate the entire transaction and the process itself, as it is extremely necessary to affirm  the personality of an individual or check the accuracy of the data. 

The IT Act permits the utilization of an electronic or digital signature for 

  • recording any structure, application or archive with any administration authority; 
  • issue of any permit, license or endorsement by the public authority; and
  • receipt or instalment of cash in a specific way, in electronic structure. 

Following conditions should be met for  an electronic signature to be considered reliable:

  • It must be unique to signatory;
  • While putting the signature, the signatory must have control over the data used to generate the electronic signature;
  • Alteration to the affixed electronic signature, or to the document to which the signature is affixed, should be detectable;
  • An audit trail of steps taken during the signing process should be available
  • The signer certificates must be issued by a certifying authority (CA) recognized by the Controller of Certifying Authorities appointed under the IT Act (Second Schedule).

 
The public authority may make rules endorsing the way where electronic records and electronic signatures are acknowledged for these reasons. For example, Rule 7 of the Companies (Registration Offices and Fees) Rules, 2014 indicates that each application, fiscal summary, outline, return, affirmation, reminder, articles, specifics of charges, or some other points of interest or report or any notification, will be documented in PC coherent electronic structure in pdf. Further, Rule 8 specifies that an e-structure should be verified utilizing Digital Signature; and the Central Board of Direct Taxes have told strategy for documenting e-TDS/e-TCS and different structures utilizing digital signatures.
 
Although digital signatures are widely accepted in India through governing laws, the following documents must be signed with a traditional signature, physically:

  • A power-of-attorney.
  • A trust.
  • A negotiable instrument (other than a cheque) 
  • Any contract for sale or conveyance of immovable property or any interest in such property.
  • A will.

Thus, it is clear that although e-signatures can be extremely helpful to quicken the process of verification, it cannot be used in all places as it can be seen above. This is, of course, due to identity thefts, forging documents, or notarization which can only be completed by an enrolled public accountant under their signature and seal. Therefore, legislations must make ways for smooth verification through digital signatures in all forms of transactions/business by ensuring that there is complete authenticity in the same. 

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