Are E-Signatures Legally Binding in India?

Introduction

At its core, a signature serves as an authentication mechanism, verifying the parties' identities, their personal involvement, and their consent to contractual terms. Additionally, it preserves document integrity by protecting the contents at the time of signing, minimizing the risk of unilateral modifications without acknowledgment.

Electronic Contracts in India

One foundational principle to remember is that under Indian law (specifically, Section 10-A of the Information Technology Act, 2000 (“IT Act”)), a contract cannot be deemed unenforceable merely because it was formed electronically. Consequently, if a contract meets all the traditional legal requirements (such as there being free consent, competence of the parties, lawful consideration, etc.), it remains enforceable even if created electronically.

Contracts can be formed orally, through email, or using other electronic methods. However, there are certain categories of contracts to which the above principles do not apply. These categories are mentioned in Schedule 1 of the IT Act and include negotiable instruments (except for certain exceptions), powers of attorney, trusts, and wills. Before entering into these types of contracts, it is crucial to seek legal advice to determine if there are any specific laws that permit them to be signed electronically.

Electronic Signatures under Indian Law

Additionally, there are some documents that the law requires mandatorily to be signed. In such a case, the foundational principle we have mentioned above will not help and these kinds of documents, if not physically signed, can only be signed using an ‘electronic signature’. While the term "electronic signature" is used loosely on the internet, under Indian law, it has a narrow and specific connotation. "Electronic signature" is defined under the IT Act as the authentication of any electronic record by a subscriber through an electronic technique specified in the Second Schedule and includes a digital signature.

Therefore, under Indian law, a reference to an electronic signature means either digital signatures or electronic signatures.

• (a) Digital Signatures: These are the most secure type, requiring a physical token and formal identity verification. They offer a high level of assurance about the signer's identity.
• (b) Electronic Signatures: This broader category includes methods like Aadhaar e-Sign (linked to your government ID) and other e-KYC authentication systems as well as authentication technique and procedure for creating and accessing the subscriber's signature key facilitated by a trusted third party (with the signature certificate being issued by the Certifying Authority (“CA”).

^[1] https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/ml-elecsig-e.pdf

Given the restrictive definition of electronic signatures, we do not believe that the services offered by DocuSign, Adobe Sign, Box Sign, Pandadoc, etc., qualify as 'electronic signatures' as defined under the IT Act unless these services are/can be used in combination with certificates issued by CA.

Execution of documents through 'electronic signatures' as defined under the IT Act also provides certain benefits when it comes to enforcing these documents. For agreements executed using 'electronic signatures’, legal presumptions established by the Indian Evidence Act, of 1872, work in their favor. These presumptions make it easier to establish the authenticity of the signatures and the agreement itself.

Conclusion

Understanding the legal framework surrounding electronic signatures is crucial for businesses operating in India. By leveraging electronic signatures in compliance with the IT Act, businesses can streamline their contracting processes, enhance security, and ensure the enforceability of their electronic contracts.

‍

‍