Exceptions to Digital Signatures

The impact of the COVID19 pandemic has brought to the fore an important facet of executing documents: an accelerated use of digital modes for signing documents. In fact through last year, various courts including the Delhi High Court, and Bombay High Court had introduced digital signature authentication of their orders. Reportedly, the Tamil Nadu Government also implements digital signatures on birth certificates and e-tenders.

Section 2(1)(p) of the Information Technology Act, 2000 (“IT Act”) defines ‘digital signature’ in the following manner: the authentication of any electronic record by a subscriber by means of an electronic method or procedure in accordance with the provisions of section 3 of IT Act, 2000.

However, the IT Act also provides for some exceptions to the use of digital signatures.

Section 1(4) of the IT Act provides that the provisions of the aforesaid IT Act do not apply to documents or transactions specified in the First Schedule to the IT Act unless amended by a notification of the Central Government in the official gazette.

The First Schedule lists out the following documents / transactions:

1. A negotiable instrument (other than a cheque) as defined in section 13 of the Negotiable Instruments Act, 1881 (26 of 1881);

2. A power-of-attorney as defined in section 1A of the Powers-of-Attorney Act, 1882 (7 of 1882);

3. A trust as defined in section 3 of the Indian Trust Act, 1882 (2 of 1882);

4. A will as defined in clause (h) of section 2 of the Indian Succession Act, 1925 (39 of 1925), including any other testamentary disposition by whatever name called; and

5. Any contract for the sale or conveyance of immovable property or any interest in such property.

While examining writ petitions filed challenging the constitutional validity of the procedure adopted by certain banks in their e-auction sale of secured assets under the SARFAESI Act in Tamil Nadu Organic Pvt. Ltd. Vs. State Bank of India, AIR 2014, the Madras High Court inter alia had held that, “the contractual liabilities could rise by the way of electronic means and that such contracts could be enforced through law”. The Hon’ble Court further stated that the authentication of electronic records are usually made by affixing of digital signature as provided under section 3 of the IT Act and that section 10-A of the IT Act enables the use of electronic records and electronic means for the conclusion of agreements, contracts and other purposes.

In fact the Supreme Court in the matter of Trimex International Fze vs Vedanta Aluminium Limited, India on 22 January, 2010 had held that “…once the contract was concluded orally or in writing, the mere fact that a formal contract has to be prepared and initialed by the parties would not affect either the acceptance of the contract so entered into or implementation thereof, even if the formal contract has never been initialed.”

Therefore, a digital signature enjoys the privilege of a presumption of authenticity and admissibility.

The Digital Signature and electronic records are recognized by the Indian Evidence Act, 1872 under various sections (Section 3, 22A, 47A, 67A, 85) and holds an evidentiary value under Section 73-A.

By Pavithra Babu, Advocate