Law For The Virtual Realm

There is a widespread perception in this country that the information technology (IT) industry has been so successful precisely because the government has left it well alone. To adherents to this view, the setting up of the IT ministry was the equivalent of the hangman's noose for the industry. The ministry's first major legislative foray, the Information Technology Bill, 1999 gives the country a chance to assess the likely impact of government intervention on the IT sector. Are the prophets of doom right?

The developments leading up to the final version of the Bill certainly made it seem as though they were. The government ultimately withdrew two amazing clauses, which justifiably had the industry howling in protest. One was the requirement that all portals and websites within India be compulsorily registered. The other was that cybercafes maintain a register of visitors and websites visited by them. Quite apart from the fact that the second clause violates certain fundamental notions of privacy, the utility value of a visitor's register to track down a person who intends to commit a crime is questionable, to say the least.

 

Now that these are out of the way, the Bill looks a lot more benign and progressive. It basically confers a status of legality on transactions undertaken over the Net. There is a large body of commercial law governing the rights of contracting parties, which has evolved in the context of face-to-face transactions, and which has assimilated the increasing importance of first postal and then telephonic transactions. The Bill extends coverage of this law to transactions over the Net. E-commerce suffers an inherent information asymmetry, which may neutralise the savings in transactions costs, making it a not so attractive trading mechanism. Coverage under contract law reduces the asymmetry. A buyer may not see whom he is dealing with, but at least he now has some legal protection against breach of contract and fraud.

Much of the Bill is concerned with laying down the procedure under which contracts can be signed over the net. The so-called "digital signature" warrants an elaborate process of authentication, which is proposed to be carried out by licensed agents under the supervision of a controlling authority. There are penalties spelt out for various violations, which will be investigated by a mechanism similar to that of SEBI. Ultimately, the decisions of the controlling authority are subject to scrutiny by an appellate authority, again similar to the SEBI structure.

The bill does deal adequately with the crucial need to legitimise Net transactions under conventional principles of contract law. However, legal sanctions are only as good as the speed with which they are imposed. Judicial ponderousness may not be too much of a problem in a traditional bricks-and-mortar scenario, where businesses take time to set up and wind up. On the Net, entry and exit for aspiring businessmen are at the click of a mouse. The kinds of procedures and sanctions proposed may not have any teeth. Also, the Bill is not explicit on IT as a facilitator of transactions between the public and the bureaucracy. Dare one hope for a digital "ration card" in version 1.1?