Centre for Internet and Society

An Analysis of the RBI’s Draft Framework on Regulatory Sandbox for Fintech

vipul — 2019-05-08T13:57:49Z

The term Fintech is generally used to describe innovative technology and technological processes being used in the financial services sector.

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It originated as a term referring to the back-end technology used by large financial institutions, but has expanded to include technological innovation in the financial sector, including innovations in financial literacy and education, retail banking, investments, etc. Entities engaged in FinTech offer an array of services ranging from peer-to-peer lending platforms and mobile payment solutions to online portfolio management tools and international money transfers.

Regulation and supervision of the Fintech industry raises some unique challenges for regulatory authorities as they have to strike a balance between financial inclusion, stability, integrity, consumer protection, and competition. One of the methods that have been adopted by regulators in certain jurisdictions to tackle the complexities of this sector is to establish a “regulatory sandbox” which could nurture innovative fintech enterprises while at the same time ensuring that the risk associated with any regulatory relaxations is contained within specified boundaries. It was precisely for this reason that establishment of a regulatory sandbox was one of the options put forward by the Working Group on Fintech and Digital Banking established by the Reserve Bank of India in its report of November, 2017 which was released for public comments on February 8, 2018. Acting on this recommendation the Reserve Bank has proposed a Draft Enabling Framework for Regulatory Sandbox, dated April 18, 2019, (“RBI Framework”) which is analysed and discussed below.

Regulatory Sandbox and its benefits

While the basic concept of a regulatory sandbox is to ensure that there is regulatory encouragement and incentive for fledgling Fintech enterprises in a contained environment to mitigate risks, different regulatory authorities have adopted varied methods of achieving this objective. While the Australian Securities and Exchange Commission (ASIC) uses a method where the eligible enterprises notify the ASIC and commence testing without an individual application process, the Financial Conduct Authority, UK (FCA) uses a cohort approach wherein eligible enterprises have to apply to the FCA which then selects the best options based on criteria laid down in the policy. The RBI has, not surprisingly, adopted an approach similar to the FCA wherein applicants will be selected by the RBI based on pre-defined eligibility criterion and start the regulatory sandbox in cohorts containing a few entities at a time.

A regulatory sandbox offers the users the opportunity to test the product’s viability without a larger and more expensive roll out involving heavy investment and regulatory authorizations. If the product appears to have the potential to be successful, it might then be authorized and brought to the broader market more quickly. If there are any problems with the product the limited nature of the sandbox ensures that the consequences of the problems are contained and do not affect the broader market. It also allows regulators to obtain first-hand empirical evidence on the benefits and risks of emerging technologies and business models, and their implications, which allows them to take a considered (and perhaps more nuanced) view on the regulatory requirements that may be needed to support useful innovation, while mitigating the attendant risks. A regulatory sandbox initiative also sends a clear signal to the market that innovation is on the agenda of the regulator.

RBI Draft Framework

Since the RBI has adopted a cohort approach for its regulatory sandbox process (“RS”), it implies that fintech entities will have to apply to the RBI to be selected in the RS. The eligibility criterion provides that the applicants will have to meet the eligibility conditions prescribed by the government for start-ups as per the Government of India, Department of Industrial Policy and Promotion, Notification GSR 364(E) April 11, 2018. The RS will focus on areas where (i) there is an absence of regulations, (ii) regulations need to be eased to encourage innovation, and (iii) the innovation/product shows promise of easing/effecting delivery of financial services in a significant way. The Framework also provides an indicative list of innovative products and technologies which could be considered for RS testing, and at the same time prohibits certain products and technologies from being considered for this programme such as credit registry, crypto currencies, ICOs, etc.

The RBI Framework also lays down specific conditions that the entity has to satisfy in order to be considered for the RS such as satisfaction of the conditions to be considered a start-up, minimum net worth requirements, fit and proper criteria for Directors and Promoters, satisfactory conduct of bank accounts of promoters/directors, satisfactory credit score, technological readiness of the product for deployment in the broader market, ensuring compliance with existing laws and regulations on consumer data and privacy, adequate safeguards in its IT systems for protection against unauthorised access etc. and a robust IT infrastructure and managerial resources. The fit and proper criteria for Directors and Promoters which requires elements of credit history along with the minimum net worth requirements in the RBI Framework are conditions which may be too difficult for some of the smaller and newer start-ups to satisfy even though the technology and products they offer might be sound. The applicants are also required to: (i) highlight an existing gap in the financial ecosystem and how they intend to address that, (ii) show a regulatory barrier or gap that prevents the implementation of the solution on a large scale, (iii) clearly define the test scenarios, expected outcomes, boundary conditions, exit or transition strategy, assessment and mitigation of risks, etc.

The RBI Framework specifies that the focus of the RS should be narrow in terms of areas of innovation and limited in terms of intake. While limits on the number of entities per cohort may be justified based on paucity of resources, limiting the focus of the RS by narrow areas of innovation is a lost opportunity in terms of sharing of ideas and learning from the mistakes of their colleagues who may be employing technologies and principles which could be useful in fields other than those where they are currently being applied.

The RBI Framework specifies that the boundaries of the RS have to be well defined so that any consequences of failure can be contained. These boundary conditions include a specific start and end date, target customer type and limits on number of customers, cash holdings, transaction amounts and customer losses. The Framework does not put in place any hard numbers on the boundary conditions which ensures that the RS process can be customised to the needs of specific entities since the sample sizes and data needed to determine the viability of fintech entities and products may vary from product to product. However a major dampener is the hard limit of 12 weeks imposed on the testing phase of the RS, which is the most important phase since all the data from the operations is generated during this phase and 12 weeks may not be enough time to generate enough reliable data so as to reach a determination of the viability of the product.

Although the RBI has shown a willingness to relax regulatory requirements for RS participants on a case to case basis, it has specified that there shall be no relaxation on issues of customer privacy and data protection, security of payment data, transaction security, KYC requirements and statutory restrictions. Since this is only an initiative by the RBI the RS participants dealing with the insurance or securities sector would not be entitled to any relaxations from the IRDA or the SEBI even if they are found eligible for relaxations from RBI regulations. This would severely limit the efficacy of the RS process and is an issue that could have been addressed if all three regulators had collaborated thereby encouraging innovative start-ups offering a broader spectrum of services.

Once the RS is finished, the regulatory relaxations provided by the RBI will expire and the fintech entity will have to either stop operations or comply with the relevant regulations. In case the entity requires an extension of the RS period, it would apply to the RBI atleast one month prior to the expiry of the RS period with reasons for the extension. The RBI also has the option of prematurely terminating the sandbox process in case the entity does not achieve its intended purpose or if it cannot comply with the regulatory requirements and other conditions specified at the relevant stage of the sandbox process. The fintech entity is also entitled to quit the RS process prematurely by giving one week’s notice to the RBI, provided it ensures that all its existing obligations to its customers are fully addressed before such discontinuance. Infact customer obligations have to be met by the fintech entities irrespective of whether the operations are prematurely ended by the entity or it continues through the entire RS process; no waiver of the legal liability towards consumers is provided by the RS process. In addition, customers are required to be notified upfront about the potential risks and their explicit consent is to be taken in this regard.

The RBI Framework itself lists out some of the risks associated with the regulatory sandbox model such as (i) loss of flexibility in going through the RS process, (ii) case by case determinations involve time and discretional judgements, (iii) no legal waivers, (iv) requirement of regulatory approvals after the RS process is over, (iv) legal issues such as consumer complaints, challenges from rejected candidates, etc. While acknowledging the above risks the Framework also mentions that atleast some of them may be mitigated by following a time bound and transparent process thus reducing risks of arbitrary discretion and loss of flexibility.

Conclusions

While there are some who are sceptical of the entire concept of a regulatory sandbox for the reason that it loosens regulation too much while at the same time putting customers at risk, the cohort model adopted by the RBI would reduce that risk to an extent since it ensures comprehensive screening and supervision by the RBI with clear exit strategies and an emphasis on consumer interests. On the other hand the eligibility criterion for applicants prescribes minimum net worth requirements as well as credit history, etc. which may impose conditions too onerous for some start ups which may be their infancy. Further the clear emphasis on protection of customer privacy and consumer interests also ensures that the RBI will not put the interests of ordinary citizens at risk in order to promote new and untested technologies. That said, the regulatory sandbox process is a welcome initiative by the RBI which may send a signal to the financial community that it is aware of the potential advantages as well as risks of Fintech and is willing to play a proactive role in encouraging new technologies to improve the financial sector in India.

Report of Working Group on Fintech and Digital Banking, Reserve Bank of India, November, 2017, available at https://www.rbi.org.in/Scripts/PublicationReportDetails.aspx?UrlPage=&ID=892

Jenik, Ivo, and Kate Lauer. 2017. “Regulatory Sandboxes and Financial Inclusion.” Working Paper. Washington, D.C.: CGAP, available at https://www.cgap.org/sites/default/files/Working-Paper-Regulatory-Sandboxes-Oct-2017.pdf

Other countries which have regulatory sandboxes are Netherlands, Bahrain, Abu Dhabi, Saudi Arabia, etc.

Report of Working Group on Fintech and Digital Banking, Reserve Bank of India, November, 2017, available at https://www.rbi.org.in/Scripts/PublicationReportDetails.aspx?UrlPage=&ID=892

These conditions are fairly liberal in that they require that the entity should be less than 7 years old; should not have a turnover of more than 25 crores, and should be working for innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation.

Clause 5 of the RBI Framework.

Clause 6.1 of the RBI Framework.

Clause 6.3 of the RBI Framework.

Clause 6.5 of the RBI Framework.

Clause 6.4 of the RBI Framework.

Clause 6.7 of the RBI Framework.

Clauses 6.2 and 8 of the RBI Framework.

Clause 6.6 of the RBI Framework.

Clause 6.9 of the RBI Framework.

Jemima Kelly, A “fintech sandbox” might sound like a harmless idea. It's not, Financial Times, Aplphaville, https://ftalphaville.ft.com/2018/12/05/1543986004000/A--fintech-sandbox--might-sound-like-a-harmless-idea--It-s-not/

For more details visit https://cis-india.org/internet-governance/blog/vipul-kharbanda-may-8-2019-an-analysis-of-rbi-draft-framework-on-regulatory-sandbox-for-fintech

Incident Response Requirements in Indian Law

vipul — 2016-12-28T01:19:28Z

Cyber incidents have serious consequences for societies, nations, and those who are victimised by them. The theft, exploitation, exposure or otherwise damage of private, financial, or other sensitive personal or commercial data and cyber attacks that damage computer systems are capable of causing lasting harm.

A recent example of such an attack that we have seen from India is the recent data breach involving an alleged 3.2 million debit cards in India.^[1] In the case of this hack the payment processing networks such as National Payments Corporation of India, Visa and Mastercard, informed the banks regarding the leaks, based on which the banks started the process of blocking and then reissuing the compromised cards. It has also been reported that the banks failed to report this incident to the Computer Emergency Response Team of India (CERT-In) even though they are required by law to do so.^[2] Such risks are increasingly faced by consumers, businesses, and governments. A person who is a victim of a cyber incident usually looks to receive assistance from the service provider and government agencies, which are prepared to investigate the incident, mitigate its consequences, and help prevent future incidents. It is essential for an effective response to cyber incidents that authorities have as much knowledge regarding the incident as possible and have that knowledge as soon as possible. It is also critical that this information is communicated to the public. This underlines the importance of reporting cyber incidents as a tool in making the internet and digital infrastructure secure.. Like any other crime, an Internet-based crime should be reported to those law enforcement authorities assigned to tackle it at a local, state, national, or international level, depending on the nature and scope of the criminal act. This is the first in a series of blog posts highlighting the importance of incident reporting in the Indian regulatory context with a view to highlight the Indian regulations dealing with incident reporting and the ultimate objective of having a more robust incident reporting environment in India.

Incident Reporting under CERT Rules

In India, section 70-B of the Information Technology Act, 2000 (the “IT Act”) gives the Central Government the power to appoint an agency of the government to be called the Indian Computer Emergency Response Team. In pursuance of the said provision the Central Government issued the Information Technology (The Indian Computer Emergency Response Team and Manner of Performing Functions and Duties) Rules, 2013 (the “CERT Rules”) which provide the location and manner of functioning of the Indian Computer Emergency Response Team (CERT-In). Rule 12 of the CERT Rules gives every person, company or organisation the option to report cyber security incidents to the CERT-In. It also places an obligation on them to mandatorily report the following kinds of incidents as early as possible:

Targeted scanning/probing of critical networks/systems;
Compromise of critical systems/information;
Unauthorized access of IT systems/data;
Defacement of website or intrusion into a website and unauthorized changes such as inserting malicious code, links to external websites, etc.;
Malicious code attacks such as spreading of virus/worm/Trojan/botnets/spyware;
Attacks on servers such as database, mail, and DNS and network devices such as routers;
Identity theft, spoofing and phishing attacks;
Denial of Service (DoS) and Distributed Denial of Service (DDoS) attacks;
Attacks on critical infrastructure, SCADA systems and wireless networks;
Attacks on applications such as e-governance, e-commerce, etc.

The CERT Rules also impose an obligation on service providers, intermediaries, data centres and body corporates to report cyber incidents within a reasonable time so that CERT-In may have scope for timely action. This mandatory obligation of reporting incidents casts a fairly wide net in terms of private sector entities, however it is notable that prima facie the provision does not impose any obligation on government entities to report cyber incidents unless they come under any of the expressions “service providers”, “data centres”, “intermediaries” or “body corporate”. This would mean that if the data kept with the Registrar General & Census Commissioner of India is hacked in a cyber incident, then there is no statutory obligation under the CERT Rules on it to report the incident. It is pertinent to mention here that although there is no obligation on a government department under law to report such an incident, such an obligation may be contained in its internal rules and guidelines, etc. which are not readily available.

It is pertinent to note that although the CERT Rules provide for a mandatory obligation to report the cyber incidents listed therein, the Rules themselves do not provide for any penalty for non compliance. However this does not mean that there are no consequences for non compliance, it just means that we have to look to the parent legislation i.e. the IT Act for the appropriate penalties for non compliance. Section 70B(6) gives the CERT-In the power to call for information and give directions for the purpose of carrying out its functions. Section 70B(7) provides that any service provider, intermediary, data center, body corporate or person who fails to provide the information called for or comply with the direction under sub-section (6), shall be liable to imprisonment for a period up to 1 (one) year or fine of up to 1 (one) lakh or both.

It is possible to argue here that sub-section (6) only talks about calls for information by CERT-In and the obligation under Rule 12 of the CERT Rules is an obligation placed by the central government and not CERT-In. It can also be argued that sub-section (6) is only meant for specific requests made by CERT-In for information and sub-section (7) only penalises those who do not respond to these specific requests. However, even if these arguments were to be accepted and we were to conclude that a violation of the obligation imposed under Rule 12 would not attract the penalty stipulated under sub-section (7) of section 70B, that does not mean that Rule 12 would be left toothless. Section 44(b) of the IT Act provides that where any person is required under any of the Rules or Regulations under the IT Act to furnish any information within a particular time and such person fails to do so, s/he may be liable to pay a penalty of upto Rs. 5,000/- for every day such failure continues. Further section 45 provides for a further penalty of Rs.25,000/- for any contravention of any of the rules or regulations under the Act for which no other penalty has been provided.

Incident Reporting under Intermediary Guidelines

Section 2(1)(w) of the IT Act defined the term “intermediary” in the following manner;

“intermediary” with respect to any particular electronic record, means any person who on behalf of another person receives, stores or transmits that record or provides any service with respect to that record and includes telecom service providers, network service providers, internet service providers, web hosting service providers, search engines, online payment sites, online-auction sites, online market places and cyber cafes.

Rule 3(9) of the Information Technology (Intermediaries Guidelines) Rules, 2011 (the “Intermediary Guidelines”) also imposes an obligation on any intermediary to report any cyber incident and share information related to cyber security incidents with the CERT-In. Since neither the Intermediary Guidelines not the IT Act specifically provide for any penalty for non conformity with Rule 3(9) therefore any enforcement action against an intermediary failing to report a cyber security incident would have to be taken under section 45 of the IT Act containing a penalty of Rs. 25,000/-.

Incident Reporting under the Unified License

Clause 39.10(i) of the Unified License Agreement obliges the telecom company to create facilities for the monitoring of all intrusions, attacks and frauds on its technical facilities and provide reports on the same to the Department of Telecom (DoT). Further clause 39.11(ii) provides that for any breach or inadequate compliance with the terms of the license, the telecom company shall be liable to pay a penalty amount of Rs. 50 crores (Rs. 50,00,00,000) per breach.

Conclusion

It is clear from the above discussion that there is a legal obligation service providers to report cyber incidents to the CERT-In. Presently, the penalty prescribed under Indian law may not be enough to incentivise companies to adopt comprehensive and consistent incident response programmes. , except in cases of telecom companies under the Unified License Agreement. A fine of Rs. 25,000/- appears to be inconsequential when compared to the possible dangers and damages that may be caused due to a security breach of data containing, for example, credit card details.. Further, it is also imperative that apart from the obligation to report the cyber incident to the appropriate authorities (CERT-In) there should also be a legal obligation to report it to the data subjects whose data is stolen or is put at risk due to the said breach. A provision requiring notice to the data subjects could go a long way in ensuring that service providers, intermediaries, data centres and body corporates implement the best data security practices since a breach would then be known by general consumers leading to a flurry of bad publicity which could negatively impact the business of the data controller, and for a business entity an economic stimulus may be an effective way to ensure compliance.

As we continue to research incident response, the questions and areas we are exploring include the ecosystem of incidence response including what is reported, how, and when, appropriate incentives to companies and governments to report incidents, various forms of penalties, the role of cross border sharing of information and jurisdiction and best practices for incident reporting and citizen awareness.

Published under Creative Commons License CC BY-SA. Anyone can distribute, remix, tweak, and build upon this document, even for commercial purposes, as long as they credit the creator of this document and license their new creations under the terms identical to the license governing this document

^[1] http://www.huffingtonpost.in/2016/10/21/atm-card-hack-what-banks-are-saying-about-india-s-biggest-data/

^[2] http://tech.economictimes.indiatimes.com/news/internet/cert-in-had-warned-banks-on-oct-7-about-expected-targeted-attacks-from-pakistan/54991025

For more details visit https://cis-india.org/internet-governance/blog/incident-response-requirements-in-indian-law

Comments on the Draft Second Protocol to the Convention on Cybercrime (Budapest Convention)

vipul — 2019-02-25T16:48:18Z

Following consultations with data protection, civil society, industry and others, during the Cybercrime Convention Committee (T-CY) meeting from 29 November 2018 onwards, the Cybercrime Convention Committee has sought additional contributions regarding the provisional draft text for a Second Additional Protocol to the Budapest Convention on Cybercrime (“Budapest Convention”).

The Centre for Internet and Society, (“CIS”), is a non-profit organisation that undertakes interdisciplinary research on internet and digital technologies from policy and academic perspectives. The areas of focus include digital accessibility for persons with diverse abilities, access to knowledge, intellectual property rights, openness (including open data, free and open source software, open standards, and open access), internet governance, telecommunication reform, digital privacy, artificial intelligence, freedom of expression, and cyber-security. This submission is consistent with CIS’ commitment to safeguarding general public interest, and the rights of stakeholders. CIS is thankful to the Cybercrime Convention Committee for this opportunity to provide feedback to the Draft.

The draft text addresses three issues viz. language of requests, emergency multilateral cooperation and taking statements through video conferencing. Click to download the entire submission here.

For more details visit https://cis-india.org/internet-governance/blog/vipul-kharbanda-february-25-2019-comments-on-draft-second-protocol-to-convention-on-cybercrime-budapest-convention

Cryptocurrency Regulation in India – A brief history

vipul — 2020-03-05T18:36:09Z

In March 2020, the Supreme Court of India quashed the RBI order passed in 2018 that banned financial services firms from trading in virtual currency or cryptocurrency. Keeping this policy window in mind, the Centre for Internet & Society will be releasing a series of blog posts and policy briefs on cryptocurrency regulation in India

The story of cryptocurrencies started in 2008 when a paper titled “Bitcoin: A Peer to Peer Electronic Cash System” was published by a single or group of pseudonymous developer(s) by the name of Satoshi Nakamoto. The actual network took some time to start with the first transactions taking place only in January 2009. The first actual sale of an item using Bitcoin took place a year later with a user swapping 10,000 Bitcoin for two pizzas in 2010, which attached a cash value to the cryptocurrency for the first time. By 2011 other cryptocurrencies began to emerge, with Litecoin, Namecoin and Swiftcoin all making their debut. Meanwhile, Bitcoin the cryptocurrency that started it all started getting criticised after claims emerged that it was being used on the so-called “dark web”, particularly on sites such as Silk Road as a means of payment for illegal transactions. Over the next five years cryptocurrencies steadily gained traction with increased number of transactions and the price of Bitcoin, the most popular cryptocurrency shot up from around 5 Dollars in the beginning of 2012 to almost 1000 Dollars at the end of 2017.

Riding on the back of this wave of popularity, a number of cryptocurrency exchanges started operating in India between 2012 and 2017 providing much needed depth and volume to the Indian cryptocurrency market. These included popular exchanges such as Zebpay, Coinsecure, Unocoin, Koinex, Pocket Bits and Bitxoxo. With the price of cryptocurrencies shooting up and because of its increased popularity and adoption by users outside of its traditional cult following, regulators worldwide began to take notice of this new technology; in India the RBI issued a Press Release cautioning the public against dealing in virtual currencies including Bitcoin way back in 2013. However, the transaction volumes and adoption of cryptocurrencies in India really picked up in earnest only after the demonetisation of high value currency notes in November of 2016, with the government’s emphasis on digital payments leading to alternatives to traditional online banking such as cryptocurrencies forcing their way into the public consciousness. Indian cryptocurrency exchanges started acquiring users at a much higher pace which drove up volume for cryptocurrency transactions on all Indian exchanges. The growing popularity of cryptocurrencies and its adoption by large numbers of Indian users forced the RBI to issue another Press Release in February 2017 reiterating its concerns regarding cryptocurrencies raised in its earlier Press Release of 2013.

In October and November, 2017 two Public Interest Petitions were filed in the Supreme Court of India, one by Siddharth Dalmia and another by Dwaipayan Bhowmick, the former asking the Supreme Court to restrict the sale and purchase of cryptocurrencies in India, and the latter asking for cryptocurrencies in India to be regulated. Both the petitions are currently pending in the Supreme Court.

In November, 2017 the Government of India constituted a high level Inter-ministerial Committee under the chairmanship of Shri Subhash Chandra Garg, Secretary, Department of Economic Affairs, Ministry of Finance and comprising of Shri Ajay Prakash Sawhney (Secretary, Ministry of Electronics and Information Technology), Shri Ajay Tyagi (Chairman, Securities and Exchange Board of India) and Shri B.P. Kanungo (Deputy Governor, Reserve Bank of India). The mandate of the Committee was to study various issues pertaining to Virtual Currencies and to propose specific actions that may be taken in relation thereto. This Committee submitted its report in July of 2019 recommending a ban on private cryptocurrencies in India.

In December 2017 both the RBI as well as the Ministry of Finance issued Press releases cautioning the general public about the dangers and risks associated with cryptocurrencies, with the Ministry of Finance Press Release saying that cryptocurrencies are like ponzi schemes and also declaring that they are not currencies or coins. It should be mentioned here that till the end of March 2018, the RBI and the Finance Ministry had issued various Press Releases on cryptocurrencies cautioning people against their risks, however none of them ever took any legal action or gave any enforceable directions against cryptocurrencies. All of this changed with the RBI circular dated April 6, 2018 whereby the RBI prevented Commercial and Co-operative Banks, Payments Banks, Small Finance Banks, NBFCs, and Payment System Providers not only from dealing in virtual currencies themselves but also directing them to stop providing services to all entities which deal with virtual currencies.

The effect of the circular was that cryptocurrency exchanges, which relied on normal banking channels for sending and receiving money to and from their users, could not access any banking services within India. This essentially crippled their business operations since converting cash to cryptocurrencies and vice versa was an essential part of their operations. Even pure cryptocurrency exchanges which did not deal in fiat currency, were unable to carry out their regular operations such as paying for office space, staff salaries, server space, vendor payments, etc. without access to banking services.

As a the operations of cryptocurrency exchanges took a severe hit and the number of transactions on these exchanges reduced substantially. People who had bought cryptocurrencies on these exchanges as an investment were forced to sell their crypto assets and cash out before they lost access to banking facilities. The cryptocurrency exchanges themselves found it hard to sustain operations in the face of the dual hit of reduced transaction volumes and loss of access banking services. Faced with such an existential threat, a number of exchanges who were members of the Internet and Mobile Association of India (IMAI), filed a writ petition in the Supreme Court on May 15, 2018 titled Internet and Mobile Association of India v. Reserve Bank of India, the final arguments in which were heard by the Supreme Court of India in January, 2020 and the judgment is awaited. If the Supreme Court agrees with the arguments of the petitioners, then cryptocurrency exchanges would be able to restart operations in India; as a result the cryptocurrency ecosystem in India may be revived and cryptocurrencies may become a viable investment alternative again.

For more details visit https://cis-india.org/internet-governance/blog/cryptocurrency-regulation-in-india-2013-a-brief-history

Budapest Convention and the Information Technology Act

vipul — 2018-11-20T16:18:51Z

The Convention on Cybercrime adopted in Budapest (“Convention”) is the fist and one of the most important multilateral treaties addressing the issue of internet and computer crimes.

Introduction
It was drafted by the Council of Europe along with Canada, Japan, South Africa and the United States of America.[1] The importance of the Convention is also indicated by the fact that adherence to it (whether by outright adoption or by otherwise making domestic laws in compliance with it) is one of the conditions mentioned in the Clarifying Lawful Overseas Use of Data Act passed in the USA (CLOUD Act) whereby a process has been established to enable security agencies of in India and the United States to directly access data stored in each other’s territories. Our analysis of the CLOUD Act vis-à-vis India can be found here. It is in continuation of that analysis that we have undertaken here a detailed comparison of the Information Technology Act, 2000 (“IT Act”) and how it stacks up against the provisions of Chapter I and Chapter II of the Convention.^{^[2]}

Before we get into a comparison of the Convention with the IT Act, we must point out the distinction between the two legal instruments, for the benefit of readers from a non legal background. An international instrument such as the Convention on Cybercrime (generally speaking) is essentially a promise made by the States which are a party to that instrument, that they will change or modify their local laws to get them in line with the requirements or principles laid out in said instrument. In case the signatory State does not make such amendments to its local laws, (usually) the citizens of that State cannot enforce any rights that they may have been granted under such an international instrument. The situation is the same with the Convention on Cybercrime, unless the signatory State amends its local laws to bring them in line with the provisions of the Convention, there cannot be any enforcement of the provisions of the Convention within that State.[3] This however is not the case for India and the IT Act since India is not a signatory to the Convention on Cybercrime and therefore is not obligated to amend its local laws to bring them in line with the Convention.

Although India and the Council of Europe cooperated to amend the IT Act through major amendments brought about vide the Information Technology (Amendment) Act, 2008, India still has not become a signatory to the Convention on Cybercrime. The reasons for this appear to be unclear and it has been suggested that these reasons may range from the fact that India was not involved in the original drafting, to issues of sovereignty regarding the provisions for international cooperation and extradition.[4]

Convention on Cybercrime

Information Technology Act, 2000

Article 2 – Illegal access

Each Party shall adopt such legislative and other measures as may be necessary to establish as criminal offences under its domestic law, when committed intentionally, the access to the whole or any part of a computer system without right. A Party may require that the offence be committed by infringing security measures, with the intent of obtaining computer data or other dishonest intent, or in relation to a computer system that is connected to another computer system.

Section 43

If any person without permission of the owner or any other person who is incharge of a computer, computer system or computer network -

(a) accesses or secures access to such computer, computer system or computer network or computer resource

Section 66

If any person, dishonestly, or fraudulently, does any act referred to in section 43, he shall be punishable with imprisonment for a term which may extend to two three years or with fine which may extend to five lakh rupees or with both.

The Convention gives States the right to further qualify the offence of “illegal access” or “hacking” by adding elements such as infringing security measures, special intent to obtain computer data, other dishonest intent that justifies criminal culpability, or the requirement that the offence is committed in relation to a computer system that is connected remotely to another computer system.^{^[5]} However, Indian law deals with the distinction by making the act of unathorised access without dishonest or fraudulent intent a civil offence, where the offender is liable to pay compensation. If the same act is done with dishonest and fraudulent intent, it is treated as a criminal offence punishable with fine and imprisonment which may extend to 3 years.

It must be noted that this provision was included in the Act only through the Amendment of 2008 and was not present in the Information Technology Act, 2000 in its original iteration.

Convention on Cybercrime

Information Technology Act, 2000

Article 3 – Illegal Interception

Each Party shall adopt such legislative and other measures as may be necessary to establish as criminal offences under its domestic law, when committed intentionally, the interception without right, made by technical means, of non-public transmissions of computer data to, from or within a computer system, including electromagnetic emissions from a computer system carrying such computer data. A Party may require that the offence be committed with dishonest intent, or in relation to a computer system that is connected to another computer system.

Although the Information Technology Act, 2000 does not specifically criminalise the interception of communications by a private person. It is possible that under the provisions of Rule 43(a) the act of accessing a “computer network” could be interpreted as including unauthorised interception within its ambit.

The other way in which illegal interception may be considered to be illegal is through a combined reading of Sections 69 (Interception) and 45 (Residuary Penalty) with Rule 3 of the Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009 which prohibits interception, monitoring and decryption of information under section 69(2) of the IT Act except in a manner as provided by the Rules. However, it must be noted that section 69(2) only talks about interception by the government and Rule 3 only provides for procedural safeguards for such an interception. It could therefore be argued that the prohibition under Rule 3 is only applicable to the government and not to private individuals since section 62, the provision under which Rule 3 has been issued, itself is not applicable to private individuals.

Convention on Cybercrime

Information Technology Act, 2000

Article 4 – Data interference

1 Each Party shall adopt such legislative and other measures as may be necessary to establish as criminal offences under its domestic law, when committed intentionally, the damaging, deletion, deterioration, alteration or suppression of computer data without right.

2 A Party may reserve the right to require that the conduct described in paragraph 1 result in serious harm.

Section 43

If any person without permission of the owner or any other person who is incharge of a computer, computer system or computer network -

(d) damages or causes to be damaged any computer, computer system or computer network, data, computer data base or any other programmes residing in such computer, computer system or computer network;

(i) destroys, deletes or alters any information residing in a computer resource or diminishes its value or utility or affects it injuriously by any means;

(j) Steals, conceals, destroys or alters or causes any person to steal, conceal, destroy or alter any computer source code used for a computer resource with an intention to cause damage,

he shall be liable to pay damages by way of compensation not exceeding one crore rupees to the person so affected. (change vide ITAA 2008)

Section 66

Damage, deletion, diminishing in value and alteration of data is considered a crime as per Section 66 read with section 43 of the IT Act if done with fraudulent or dishonest intention. While the Convention only requires such acts to be crimes if committed intentionally, however the Information Technology Act requires that such intention be either dishonest or fraudulent only then such an act will be a criminal offence, otherwise it will only incur civil consequences requiring the perpetrator to pay damages by way of compensation.

It must be noted that the optional requirement of such an act causing serious harm has not been adopted by Indian law, i.e. the act of such damage, deletion, etc. by itself is enough to constitute the offence, and there is no requirement of such an act causing serious harm.

As per the Explanatory Report to the Convention on Cybercrime, “Suppressing of computer data means any action that prevents or terminates the availability of the data to the person who has access to the computer or the data carrier on which it was stored.” Strictly speaking the act of suppression of data in another system is not covered by the language of section 43, but looking at the tenor of the section it is likely that if a court is faced with a situation of intentional/malicious denial of access to data, the court could expand the scope of the term “damage” as contained in sub-section (d) to include such malicious acts.

Convention on Cybercrime

Information Technology Act, 2000

Article 5 – System interference

Each Party shall adopt such legislative and other measures as may be necessary to establish as criminal offences under its domestic law, when committed intentionally, the serious hindering without right of the functioning of a computer system by inputting, transmitting, damaging, deleting, deteriorating, altering or suppressing computer data.

Section 43

If any person without permission of the owner or any other person who is incharge of a computer, computer system or computer network -

(e) disrupts or causes disruption of any computer, computer system or computer network;

Explanation - for the purposes of this section -

(i) "Computer Contaminant" means any set of computer instructions that are designed -

(a) to modify, destroy, record, transmit data or programme residing within a computer, computer system or computer network; or

(b) by any means to usurp the normal operation of the computer, computer system, or computer network;

(iii) "Computer Virus" means any computer instruction, information, data or programme that destroys, damages, degrades or adversely affects the performance of a computer resource or attaches itself to another computer resource and operates when a programme, data or instruction is executed or some other event takes place in that computer resource;

Section 66

The offence of causing hindrance to the functioning of a computer system with fraudulent or dishonest intention is an offence under the IT Act. While the Convention only requires such acts to be crimes if committed intentionally, however the IT Act requires that such intention be either dishonest or fraudulent only then such an act will be a criminal offence, otherwise it will only incur civil consequences requiring the perpetrator to pay damages by way of compensation.

The IT Act does not require such disruption to be caused in any particular manner as is required under the Convention, although the acts of introducing computer viruses as well as damaging or deleting data themselves have been classified as offences under the IT Act.

Convention on Cybercrime

Information Technology Act, 2000

Article 6 – Misuse of devices

1 Each Party shall adopt such legislative and other measures as may be necessary to establish as criminal offences under its domestic law, when committed intentionally and without right:

a the production, sale, procurement for use, import, distribution or otherwise making available of:

i a device, including a computer program, designed or adapted primarily for the purpose of committing any of the offences established in accordance with Articles 2 through 5;

ii a computer password, access code, or similar data by which the whole or any part of a computer system is capable of being accessed, with intent that it be used for the purpose of committing any of the offences established in Articles 2 through 5; and

b the possession of an item referred to in paragraphs a.i or ii above, with intent that it be used for the purpose of committing any of the offences established in Articles 2 through 5. A Party may require by law that a number of such items be possessed before criminal liability attaches.

2 This article shall not be interpreted as imposing criminal liability where the production, sale, procurement for use, import, distribution or otherwise making available or possession referred to in paragraph 1 of this article is not for the purpose of committing an offence established in accordance with Articles 2 through 5 of this Convention, such as for the authorised testing or protection of a computer system.

3 Each Party may reserve the right not to apply paragraph 1 of this article, provided that the reservation does not concern the sale, distribution or otherwise making available of the items referred to in paragraph 1 a.ii of this article.

This provision establishes as a separate and independent criminal offence the intentional commission of specific illegal acts regarding certain devices or access data to be misused for the purpose of committing offences against the confidentiality, the integrity and availability of computer systems or data. While the IT Act does not by itself makes the production, sale, procurement for use, import, distribution of devices designed to be adopted for such purposes, sub-section (g) of section 43 along with section 120A of the Indian Penal Code, 1860 which deals with “conspiracy” could perhaps be used to bring such acts within the scope of the penal statutes.

Convention on Cybercrime

Information Technology Act, 2000

Article 7 – Computer related forgery

Each Party shall adopt such legislative and other measures as may be necessary to establish as criminal offences under its domestic law, when committed intentionally and without right, the input, alteration, deletion, or suppression of computer data, resulting in inauthentic data with the intent that it be considered or acted upon for legal purposes as if it were authentic, regardless whether or not the data is directly readable and intelligible. A Party may require an intent to defraud, or similar dishonest intent, before criminal liability attaches.

The acts of deletion, alteration and suppression of data by itself is a crime as discussed above, there is no specific offence for doing such acts for the purpose of forgery. However this does not mean that the crime of online forgery is not punishable in India at all, such crimes would be dealt with under the relevant provisions of the Indian Penal Code, 1860 (Chapter 18) read with section 4 of the IT Act.

Convention on Cybercrime

Information Technology Act, 2000

Article 8 – Computer-related fraud

a any input, alteration, deletion or suppression of computer data,

b any interference with the functioning of a computer system,

with fraudulent or dishonest intent of procuring, without right, an economic benefit for oneself or for another person.

Just as in the case of forgery, there is no specific provision in the IT Act whereby online fraud would be considered as a crime, however specific acts such as charging services availed of by one person to another (section 43(h), identity theft (section 66C), cheating by impersonation (section 66D) have been listed as criminal offences. Further, as with forgery, fraudulent acts to procure economic benefits would also get covered by the provisions of the Indian Penal Code that deal with cheating.

Convention on Cybercrime

Information Technology Act, 2000

Article 9 – Offences related to child pornography

1 Each Party shall adopt such legislative and other measures as may be necessary to establish as criminal offences under its domestic law, when committed intentionally and without right, the following conduct:

a producing child pornography for the purpose of its distribution through a computer system;

b offering or making available child pornography through a computer system;

c distributing or transmitting child pornography through a computer system;

d procuring child pornography through a computer system for oneself or for another person;

e possessing child pornography in a computer system or on a computer-data storage medium.

2 For the purpose of paragraph 1 above, the term "child pornography" shall include pornographic material that visually depicts:

a a minor engaged in sexually explicit conduct;

b a person appearing to be a minor engaged in sexually explicit conduct;

c realistic images representing a minor engaged in sexually explicit conduct.

3 For the purpose of paragraph 2 above, the term "minor" shall include all persons under 18 years of age. A Party may, however, require a lower age-limit, which shall be not less than 16 years.

4 Each Party may reserve the right not to apply, in whole or in part, paragraphs 1, subparagraphs d and e, and 2, sub-paragraphs b and c.

67 B Punishment for publishing or transmitting of material depicting children in sexually explicit act, etc. in electronic form.

Whoever,-

(a) publishes or transmits or causes to be published or transmitted material in any electronic form which depicts children engaged in sexually explicit act or conduct or

(b) creates text or digital images, collects, seeks, browses, downloads, advertises, promotes, exchanges or distributes material in any electronic form depicting children in obscene or indecent or sexually explicit manner or

(c) cultivates, entices or induces children to online relationship with one or more children for and on sexually explicit act or in a manner that may offend a reasonable adult on the computer resource or

(d) facilitates abusing children online or

(e) records in any electronic form own abuse or that of others pertaining to sexually explicit act with children,

shall be punished on first conviction with imprisonment of either description for a term which may extend to five years and with a fine which may extend to ten lakh rupees and in the event of second or subsequent conviction with imprisonment of either description for a term which may extend to seven years and also with fine which may extend to ten lakh rupees:

Provided that the provisions of section 67, section 67A and this section does not extend to any book, pamphlet, paper, writing, drawing, painting, representation or figure in electronic form-

(i) The publication of which is proved to be justified as being for the public good on the ground that such book, pamphlet, paper writing, drawing, painting, representation or figure is in the interest of science, literature, art or learning or other objects of general concern; or

(ii) which is kept or used for bonafide heritage or religious purposes

Explanation: For the purposes of this section, "children" means a person who has not completed the age of 18 years.

The publishing, transmission, creation, collection, seeking, browsing, etc. of child pornography is an offence under Indian law punishable with imprisonment for upto 5 years for a first offence and upto 7 years for a subsequent offence, along with fine.

It is important to note that bona fide depictions for the public good, such as for publication in pamphlets, reading or educational material are specifically excluded from the rigours of the section, Similarly material kept for heritage or religious purposes is also exempted under this section. Such exceptions are in line with the intent of the Convention, since the Explanatory statement itself states that “The term "pornographic material" in paragraph 2 is governed by national standards pertaining to the classification of materials as obscene, inconsistent with public morals or similarly corrupt. Therefore, material having an artistic, medical, scientific or similar merit may be considered not to be pornographic.

Convention on Cybercrime

Information Technology Act, 2000

Article 10 – Offences related to infringements of copyright and related rights

1 Each Party shall adopt such legislative and other measures as may be necessary to establish as criminal offences under its domestic law the infringement of copyright, as defined under the law of that Party, pursuant to the obligations it has undertaken under the Paris Act of 24 July 1971 revising the Bern Convention for the Protection of Literary and Artistic Works, the Agreement on Trade-Related Aspects of Intellectual Property Rights and the WIPO Copyright Treaty, with the exception of any moral rights conferred by such conventions, where such acts are committed wilfully, on a commercial scale and by means of a computer system.

2 Each Party shall adopt such legislative and other measures as may be necessary to establish as criminal offences under its domestic law the infringement of related rights, as define under the law of that Party, pursuant to the obligations it has undertaken under the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organisations (Rome Convention), the Agreement on Trade-Related Aspects of Intellectual Property Rights and the WIPO Performances and Phonograms Treaty, with the exception of any moral rights conferred by such conventions, where such acts are committed wilfully, on a commercial scale and by means of a computer system.

3 A Party may reserve the right not to impose criminal liability under paragraphs 1 and 2 of this article in limited circumstances, provided that other effective remedies are available and that such reservation does not derogate from the Party’s international obligations set forth in the international instruments referred to in paragraphs 1 and 2 of this article.

81 Act to have Overriding effect

The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.

Provided that nothing contained in this Act shall restrict any person from exercising any right conferred under the Copyright Act, 1957 or the Patents Act, 1970

The use of the term "pursuant to the obligations it has undertaken" in both paragraphs makes it clear that a Contracting Party to the Convention is not bound to apply agreements cited (TRIPS, WIPO, etc.) to which it is not a Party; moreover, if a Party has made a reservation or declaration permitted under one of the agreements, that reservation may limit the extent of its obligation under the present Convention.

The IT Act does not try to intervene in the existing copyright regime of India and creates a special exemption for the Copyright Act and the Patents Act in the clause which provides this Act overriding effect. India’s obligations under the various treaties and conventions on intellectual property rights are enshrined in these legislations.^{^[6]}

Convention on Cybercrime

Information Technology Act, 2000

Article 11 – Attempt and aiding or abetting

1 Each Party shall adopt such legislative and other measures as may be necessary to establish as criminal offences under its domestic law, when committed intentionally, aiding or abetting the commission of any of the offences established in accordance with Articles 2 through 10 of the present Convention with intent that such offence be committed.

2 Each Party shall adopt such legislative and other measures as may be necessary to establish as criminal offences under its domestic law, when committed intentionally, an attempt to commit any of the offences established in accordance with Articles 3 through 5, 7, 8, and 9.1.a and c of this Convention.

3 Each Party may reserve the right not to apply, in whole or in part, paragraph 2 of this article.

84 B Punishment for abetment of offences

Whoever abets any offence shall, if the act abetted is committed in consequence of the abetment, and no express provision is made by this Act for the punishment of such abetment, be punished with the punishment provided for the offence under this Act.

Explanation: An Act or offence is said to be committed in consequence of abetment, when it is committed in consequence of the instigation, or in pursuance of the conspiracy, or with the aid which constitutes the abetment.

84 C Punishment for attempt to commit offences

Whoever attempts to commit an offence punishable by this Act or causes such an offence to be committed, and in such an attempt does any act towards the commission of the offence, shall, where no express provision is made for the punishment of such attempt, be punished with imprisonment of any description provided for the offence, for a term which may extend to one-half of the longest term of imprisonment provided for that offence, or with such fine as is provided for the offence or with both.

As can be seen, both attempts as well as abetment of criminal offences under the IT Act have also been criminalised.

Convention on Cybercrime

Information Technology Act, 2000

Article 12 – Corporate liability

1 Each Party shall adopt such legislative and other measures as may be necessary to ensure that legal persons can be held liable for a criminal offence established in accordance with this Convention, committed for their benefit by any natural person, acting either individually or as part of an organ of the legal person, who has a leading position within it, based on:

a a power of representation of the legal person;

b an authority to take decisions on behalf of the legal person;

c an authority to exercise control within the legal person.

2 In addition to the cases already provided for in paragraph 1 of this article, each Party shall take the measures necessary to ensure that a legal person can be held liable where the lack of supervision or control by a natural person referred to in paragraph 1 has made possible the commission of a criminal offence established in accordance with this Convention for the benefit of that legal person by a natural person acting under its authority.

3 Subject to the legal principles of the Party, the liability of a legal person may be criminal, civil or administrative.

4 Such liability shall be without prejudice to the criminal liability of the natural persons who have committed the offence.

85 Offences by Companies.

(1) Where a person committing a contravention of any of the provisions of this Act or of any rule, direction or order made there under is a Company, every person who, at the time the contravention was committed, was in charge of, and was responsible to, the company for the conduct of business of the company as well as the company, shall be guilty of the contravention and shall be liable to be proceeded against and punished accordingly:

Provided that nothing contained in this sub-section shall render any such person liable to punishment if he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention.

(2) Notwithstanding anything contained in sub-section (1), where a contravention of any of the provisions of this Act or of any rule, direction or order made there under has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly.

Explanation-

For the purposes of this section

(i) "Company" means any Body Corporate and includes a Firm or other Association of individuals; and

(ii) "Director", in relation to a firm, means a partner in the firm.

The liability of a company or other body corporate has been laid out in the IT Act in a manner similar to the Budapest Convention. While, the test to determine the relationship between the legal entity and the natural person who has committed the act on behalf of the legal entity is a little more detailed[7] in the Convention, the substance of the test is laid out in the IT Act as “a person who is in charge of, and was responsible to, the company”.

Convention on Cybercrime

Information Technology Act, 2000

Article 14

1 Each Party shall adopt such legislative and other measures as may be necessary to establish the powers and procedures provided for in this section for the purpose of specific criminal investigations or proceedings.

2 Except as specifically provided otherwise in Article 21, each Party shall apply the powers and procedures referred to in paragraph 1 of this article to:

a the criminal offences established in accordance with Articles 2 through 11 of this Convention;

b other criminal offences committed by means of a computer system; and

c the collection of evidence in electronic form of a criminal offence.

3 a Each Party may reserve the right to apply the measures referred to in Article 20 only to offences or categories of offences specified in the reservation, provided that the range of such offences or categories of offences is not more restricted than the range of offences to which it applies the measures referred to in Article 21. Each Party shall consider restricting such a reservation to enable the broadest application of the measure referred to in Article 20.

b Where a Party, due to limitations in its legislation in force at the time of the adoption of the present Convention, is not able to apply the measures referred to in Articles 20 and 21 to communications being transmitted within a computer system of a service provider, which system:

i is being operated for the benefit of a closed group of users, and

ii does not employ public communications networks and is not connected with another computer system, whether public or private, that Party may reserve the right not to apply these measures to such communications.

Each Party shall consider restricting such a reservation to enable the broadest application of the measures referred to in Articles 20 and 21.

This is a provision of a general nature that need not have any equivalence in domestic law. The provision clarifies that all the powers and procedures provided for in this section (Articles 14 to 21) are for the purpose of “specific criminal investigations or proceedings”.

Convention on Cybercrime

Information Technology Act, 2000

Article 15 – Conditions and safeguards

1 Each Party shall ensure that the establishment, implementation and application of the powers and procedures provided for in this Section are subject to conditions and safeguards provided for under its domestic law, which shall provide for the adequate protection of human rights and liberties, including rights arising pursuant to obligations it has undertaken under the 1950 Council of Europe Convention for the Protection of Human Rights and Fundamental Freedoms, the 1966 United Nations International Covenant on Civil and Political Rights, and other applicable international human rights instruments, and which shall incorporate the principle of proportionality.

2 Such conditions and safeguards shall, as appropriate in view of the nature of the procedure or power concerned, inter alia, include judicial or other independent supervision, grounds justifying application, and limitation of the scope and the duration of such power or procedure.

3 To the extent that it is consistent with the public interest, in particular the sound administration of justice, each Party shall consider the impact of the powers and procedures in this section upon the rights, responsibilities and legitimate interests of third parties.

This again is a provision of a general nature which need not have a corresponding clause in the domestic law. India is a signatory to a number of international human rights conventions and treaties, it has acceded to the International Covenant on Civil and Political Rights (ICCPR), 1966, International Covenant on Economic, Social and Cultural Rights (ICESCR), 1966, ratified the International Convention on the Elimination of All Forms of Racial Discrimination (ICERD), 1965, with certain reservations, signed the Convention on the Elimination of All Forms of Discrimination against Women (CEDAW), 1979 with certain reservations, Convention on the Rights of the Child (CRC), 1989 and signed the Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment (CAT), 1984. Further the right to life guaranteed under Article 21 of the Constitution takes within its fold a number of human rights such as the right to privacy. Freedom of expression, right to fair trial, freedom of assembly, right against arbitrary arrest and detention are all fundamental rights guaranteed under the Constitution of India, 1950.^{^[8]}

In addition, India has enacted the Protection of Human Rights Act, 1993 for the constitution of a National Human Rights Commission, State Human Rights Commission in States and Human Rights Courts for better protection of “human rights” and for matters connected therewith or incidental thereto. Thus, there does exist a statutory mechanism for the enforcement of human rights^{^[9]} under Indian law. It must be noted that the definition of human rights also incorporates rights embodied in International Covenants and are enforceable by Courts in India.

Convention on Cybercrime

Information Technology Act, 2000

Article 16 – Expedited preservation of stored computer data

1 Each Party shall adopt such legislative and other measures as may be necessary to enable its competent authorities to order or similarly obtain the expeditious preservation of specified computer data, including traffic data, that has been stored by means of a computer system, in particular where there are grounds to believe that the computer data is particularly vulnerable to loss or modification.

2 Where a Party gives effect to paragraph 1 above by means of an order to a person to preserve specified stored computer data in the person’s possession or control, the Party shall adopt such legislative and other measures as may be necessary to oblige that person to preserve and maintain the integrity of that computer data for a period of time as long as necessary, up to a maximum of ninety days, to enable the competent authorities to seek its disclosure. A Party may provide for such an order to be subsequently renewed.

3 Each Party shall adopt such legislative and other measures as may be necessary to oblige the custodian or other person who is to preserve the computer data to keep confidential the undertaking of such procedures for the period of time provided for by its domestic law.

4 The powers and procedures referred to in this article shall be subject to Articles 14 and 15.

Article 17 – Expedited preservation and partial disclosure of traffic data

1 Each Party shall adopt, in respect of traffic data that is to be preserved under Article 16, such legislative and other measures as may be necessary to:

a ensure that such expeditious preservation of traffic data is available regardless of whether one or more service providers were involved in the transmission of that communication; and

b ensure the expeditious disclosure to the Party’s competent authority, or a person designated by that authority, of a sufficient amount of traffic data to enable the Party to identify the service providers and the path through which the communication was transmitted.

2 The powers and procedures referred to in this article shall be subject to Articles 14 and 15.

29 Access to computers and data.

(1) Without prejudice to the provisions of sub-section (1) of section 69, the Controller or any person authorized by him shall, if he has reasonable cause to suspect that any contravention of the provisions of this chapter made there under has been committed, have access to any computer system, any apparatus, data or any other material connected with such system, for the purpose of searching or causing a search to be made for obtaining any information or data contained in or available to such computer system. (Amended vide ITAA 2008)

(2) For the purposes of sub-section (1), the Controller or any person authorized by him may, by order, direct any person in charge of, or otherwise concerned with the operation of the computer system, data apparatus or material, to provide him with such reasonable technical and other assistant as he may consider necessary.

67 C Preservation and Retention of information by intermediaries

(1) Intermediary shall preserve and retain such information as may be specified for such duration and in such manner and format as the Central Government may prescribe.

Rule 3(7) of the Information Technology (Intermediary Guidelines) Rules, 2011

3(7) - When required by lawful order, the intermediary shall provide information or any such assistance to Government Agencies who are lawfully authorised for investigative, protective, cyber security activity. The information or any such assistance shall be provided for the purpose of verification of identity, or for prevention, detection, investigation, prosecution, cyber security incidents and punishment of offences under any law for the time being in force, on a request in writing staling clearly the purpose of seeking such information or any such assistance.

It must be noted that Article 16 and Article 17 refer only to data preservation and not data retention. “Data preservation” means to keep data, which already exists in a stored form, protected from anything that would cause its current quality or condition to change or deteriorate. Data retention means to keep data, which is currently being generated, in one’s possession into the future.^{^[10]} In short, the article provides only for preservation of existing stored data, pending subsequent disclosure of the data, in relation to specific criminal investigations or proceedings.

The Convention uses the term "order or similarly obtain", which is intended to allow the use of other legal methods of achieving preservation than merely by means of a judicial or administrative order or directive (e.g. from police or prosecutor). In some States, preservation orders do not exist in the procedural law, and data can only be preserved and obtained through search and seizure or production order. Flexibility was therefore intended by the use of the phrase "or otherwise obtain" to permit the implementation of this article by the use of these means.

While Indian law does not have a specific provision for issuing an order for preservation of data, the provisions of section 29 as well as sections 99 to 101 of the Code of Criminal Procedure, 1973 may be utilized to achieve the result intended by Articles 16 and 17. Although section 67C of the IT Act uses the term “preserve and retain such information”, this provision is intended primarily for the purpose of data retention and not data preservation.

Another provision which may conceivably be used for issuing preservation orders is Rule 3(7) of the Information Technology (Intermediary Guidelines) Rules, 2011 which requires intermediaries to provide “any such assistance” to Government Agencies who are lawfully authorised for investigative, protective, cyber security activity. However, in the absence of a power of preservation in the main statute (IT Act) it remains to be seen whether such an order would be enforced if challenged in a court of law.

Convention on Cybercrime

Information Technology Act, 2000

Article 18 – Production order

1 Each Party shall adopt such legislative and other measures as may be necessary to empower its competent authorities to order:

a. a person in its territory to submit specified computer data in that person’s possession or control, which is stored in a computer system or a computer-data storage medium; and

b. a service provider offering its services in the territory of the Party to submit subscriber information relating to such services in that service provider’s possession or control.

2 The powers and procedures referred to in this article shall be subject to Articles 14 and 15.

3 For the purpose of this article, the term “subscriber information” means any information contained in the form of computer data or any other form that is held by a service provider, relating to subscribers of its services other than traffic or content data and by which can be established:

a the type of communication service used, the technical provisions taken thereto and the period of service;

b the subscriber’s identity, postal or geographic address, telephone and other access number, billing and payment information, available on the basis of the service agreement or arrangement;

c any other information on the site of the installation of communication equipment, available on the basis of the service agreement or arrangement.

Section 28(2)

(2) The Controller or any officer authorized by him in this behalf shall exercise the like powers which are conferred on Income-tax authorities under Chapter XIII of the Income-Tax Act, 1961 and shall exercise such powers, subject to such limitations laid down under that Act.

Section 58(2)

(2) The Cyber Appellate Tribunal shall have, for the purposes of discharging their functions under this Act, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, while trying a suit, in respect of the following matters, namely -

(b) requiring the discovery and production of documents or other electronic records;

While the Cyber Appellate Tribunal and the Controller of Certifying Authorities both have the power to call for information under the IT Act, these powers can be exercised only for limited purposes since the jurisdiction of both authorities is limited to the procedural provisions of the IT Act and they do not have the jurisdiction to investigate penal provisions. In practice, the penal provisions of the IT Act are investigated by the regular law enforcement apparatus of India, which use statutory provisions for production orders applicable in the offline world to computer systems as well. It is a very common practice amongst law enforcement authorities to issue orders under the Code of Criminal Procedure, 1973 (section 91) or the relevant provisions of the Income Tax Act, 1961 to compel production of information contained in a computer system. The power to order production of a “document or other thing” under section 91 of the Criminal Procedure Code is wide enough to cover all types of information which may be residing in a computer system and can even include the entire computer system itself.

Convention on Cybercrime

Information Technology Act, 2000

Article 19 – Search and seizure of stored computer data

1 Each Party shall adopt such legislative and other measures as may be necessary to empower its competent authorities to search or similarly access:

a a computer system or part of it and computer data stored therein; and

b a computer-data storage medium in which computer data may be stored in its territory.

2 Each Party shall adopt such legislative and other measures as may be necessary to ensure that where its authorities search or similarly access a specific computer system or part of it, pursuant to paragraph 1.a, and have grounds to believe that the data sought is stored in another computer system or part of it in its territory, and such data is lawfully accessible from or available to the initial system, the authorities shall be able to expeditiously extend the search or similar accessing to the other system.

3 Each Party shall adopt such legislative and other measures as may be necessary to empower its competent authorities to seize or similarly secure computer data accessed according to paragraphs 1 or 2. These measures shall include the power to:

a seize or similarly secure a computer system or part of it or a computer-data storage

medium;

b make and retain a copy of those computer data;

c maintain the integrity of the relevant stored computer data;

d render inaccessible or remove those computer data in the accessed computer system.

4 Each Party shall adopt such legislative and other measures as may be necessary to empower its competent authorities to order any person who has knowledge about the functioning of the computer system or measures applied to protect the computer data therein to provide, as is reasonable, the necessary information, to enable the undertaking of the measures referred to in paragraphs 1 and 2.

5 The powers and procedures referred to in this article shall be subject to Articles 14 and15.

76 Confiscation

Any computer, computer system, floppies, compact disks, tape drives or any other accessories related thereto, in respect of which any provision of this Act, rules, orders or regulations made thereunder has been or is being contravened, shall be liable to confiscation:

Provided that where it is established to the satisfaction of the court adjudicating the confiscation that the person in whose possession, power or control of any such computer, computer system, floppies, compact disks, tape drives or any other accessories relating thereto is found is not responsible for the contravention of the provisions of this Act, rules, orders or regulations made there under, the court may, instead of making an order for confiscation of such computer, computer system, floppies, compact disks, tape drives or any other accessories related thereto, make such other order authorized by this Act against the person contravening of the provisions of this Act, rules, orders or regulations made there under as it may think fit.

While Article 19 provides for the power to search and seize computer systems for the investigation into criminal offences of any type of kind, section 76 of the IT Act is limited only to contraventions of the provisions of the Act, rules, orders or regulations made thereunder. However, this does not mean that Indian law enforcement authorities do not have the power to search and seize a computer system for crimes other than those contained in the IT Act; just as in the case of Article 18, the authorities in India are free to use the provisions contained in the Criminal Procedure Code and other sectoral legislations which allow for seizure of property to seize computer systems when investigating criminal offences.

Convention on Cybercrime

Information Technology Act, 2000

Article 20 – Real-time collection of traffic data

1 Each Party shall adopt such legislative and other measures as may be necessary to empower its competent authorities to:

a collect or record through the application of technical means on the territory of that Party, and

b compel a service provider, within its existing technical capability:

i to collect or record through the application of technical means on the territory of that Party; or

ii to co-operate and assist the competent authorities in the collection or recording of,

traffic data, in real-time, associated with specified communications in its territory transmitted by means of a computer system.

2 Where a Party, due to the established principles of its domestic legal system, cannot adopt the measures referred to in paragraph 1.a, it may instead adopt legislative and other measures as may be necessary to ensure the real-time collection or recording of traffic data associated with specified communications transmitted in its territory, through the application of technical means on that territory.

3 Each Party shall adopt such legislative and other measures as may be necessary to oblige a service provider to keep confidential the fact of the execution of any power provided for in this article and any information relating to it.

4 The powers and procedures referred to in this article shall be subject to Articles 14 and 15.

69B Power to authorize to monitor and collect traffic data or information through any computer resource for Cyber Security

(1) The Central Government may, to enhance Cyber Security and for identification, analysis and prevention of any intrusion or spread of computer contaminant in the country, by notification in the official Gazette, authorize any agency of the Government to monitor and collect traffic data or information generated, transmitted, received or stored in any computer resource.

(2) The Intermediary or any person in-charge of the Computer resource shall when called upon by the agency which has been authorized under sub-section (1), provide technical assistance and extend all facilities to such agency to enable online access or to secure and provide online access to the computer resource generating , transmitting, receiving or storing such traffic data or information.

(3) The procedure and safeguards for monitoring and collecting traffic data or information, shall be such as may be prescribed.

(4) Any intermediary who intentionally or knowingly contravenes the provisions of sub-section (2) shall be punished with an imprisonment for a term which may extend to three years and shall also be liable to fine.

Explanation: For the purposes of this section, (i) "Computer Contaminant" shall have the meaning assigned to it in section 43.

(ii) "traffic data" means any data identifying or purporting to identify any person, computer system or computer network or location to or from which the communication is or may be transmitted and includes communications origin, destination, route, time, date, size, duration or type of underlying service or any other information.

Section 69B in the IT Act enables the government to authorise the monitoring and collection of traffic data through any computer system. Under the Convention, orders for collection and recording of traffic data can be given for the purposes mentioned in Articles 14 and 15. On the other hand, as per the Information Technology (Procedure and safeguard for Monitoring and Collecting Traffic Data or Information) Rules, 2009, an order for monitoring may be issued for any of the following purposes relating to cyber security:

(a) forecasting of imminent cyber incidents;

(b) monitoring network application with traffic data or information on computer resource;

(d) tracking cyber security breaches or cyber security incidents;

(e) tracking computer resource breaching cyber security or spreading virus or computer contaminants;

(f) identifying or tracking of any person who has breached, or is suspected of having breached or being likely to breach cyber security;

(g) undertaking forensic of the concerned computer resource as a part of investigation or internal audit of information security practices in the computer resources;

(h) accessing a stored information for enforcement of any provisions of the laws relating to cyber security for the time being in force;

(i) any other matter relating to cyber security.

As can be seen from the above, the reasons for which an order for monitoring traffic data can be issued are extremely wide, this is in stark contrast to the reasons for which an order for interception of content data may be issued under section 69. The Rules also provide that the intermediary shall not disclose the existence of a monitoring order to any third party and shall take all steps necessary to ensure extreme secrecy in the matter of monitoring of traffic data.

Convention on Cybercrime

Information Technology Act, 2000

Article 21 – Interception of content data

1 Each Party shall adopt such legislative and other measures as may be necessary, in relation to a range of serious offences to be determined by domestic law, to empower its competent authorities to:

a collect or record through the application of technical means on the territory of that Party, and

b compel a service provider, within its existing technical capability:

i to collect or record through the application of technical means on the territory of that Party, or

ii to co-operate and assist the competent authorities in the collection or recording of,

content data, in real-time, of specified communications in its territory transmitted by means of a computer system.

2 Where a Party, due to the established principles of its domestic legal system, cannot adopt the measures referred to in paragraph 1.a, it may instead adopt legislative and other measures as may be necessary to ensure the real-time collection or recording of content data on specified communications in its territory through the application of technical means on that territory.

4 The powers and procedures referred to in this article shall be subject to Articles 14 and 15.

69 Powers to issue directions for interception or monitoring or decryption of any information through any computer resource

(1) Where the central Government or a State Government or any of its officer specially authorized by the Central Government or the State Government, as the case may be, in this behalf may, if is satisfied that it is necessary or expedient to do in the interest of the sovereignty or integrity of India, defense of India, security of the State, friendly relations with foreign States or public order or for preventing incitement to the commission of any cognizable offence relating to above or for investigation of any offence, it may, subject to the provisions of sub-section (2), for reasons to be recorded in writing, by order, direct any agency of the appropriate Government to intercept, monitor or decrypt or cause to be intercepted or monitored or decrypted any information transmitted received or stored through any computer resource.

(2) The Procedure and safeguards subject to which such interception or monitoring or decryption may be carried out, shall be such as may be prescribed

(3) The subscriber or intermediary or any person in charge of the computer resource shall, when called upon by any agency which has been directed under sub section (1), extend all facilities and technical assistance to -

(a) provide access to or secure access to the computer resource containing such information; generating, transmitting, receiving or storing such information; or

(b) intercept or monitor or decrypt the information, as the case may be; or

(4) The subscriber or intermediary or any person who fails to assist the agency referred to in sub-section (3) shall be punished with an imprisonment for a term which may extend to seven years and shall also be liable to fine.

There has been a lot of academic research and debate around the exercise of powers under section 69 of the IT Act, but the current piece is not the place for a standalone critique of section 69.[11] The analysis here is limited to a comparison of the provisions of Article 20 vis-à-vis section 69 of the IT Act.

In that background, it needs to be pointed out that two important issues mentioned in Article 20 of the Convention are not specifically mentioned in section 69B, viz. (i) that the order should be only for specific computer data, and (ii) that the intermediary should keep such an order confidential; these requirements are covered by Rules 9 and 20 of the Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009, respectively.

Convention on Cybercrime

Information Technology Act, 2000

Article 22 – Jurisdiction

1 Each Party shall adopt such legislative and other measures as may be necessary to establish jurisdiction over any offence established in accordance with Articles 2 through 11 of this Convention, when the offence is committed:

a in its territory; or

b on board a ship flying the flag of that Party; or

c on board an aircraft registered under the laws of that Party; or

d by one of its nationals, if the offence is punishable under criminal law where it was committed or if the offence is committed outside the territorial jurisdiction of any State.

2 Each Party may reserve the right not to apply or to apply only in specific cases or conditions the jurisdiction rules laid down in paragraphs 1.b through 1.d of this article or any part thereof.

3 Each Party shall adopt such measures as may be necessary to establish jurisdiction over the offences referred to in Article 24, paragraph 1, of this Convention, in cases where an alleged offender is present in its territory and it does not extradite him or her to another Party, solely on the basis of his or her nationality, after a request for extradition.

4 This Convention does not exclude any criminal jurisdiction exercised by a Party in accordance with its domestic law.

5 When more than one Party claims jurisdiction over an alleged offence established in accordance with this Convention, the Parties involved shall, where appropriate, consult with a view to determining the most appropriate jurisdiction for prosecution.

1. Short Title, Extent, Commencement and Application

(2) It shall extend to the whole of India and, save as otherwise provided in this Act, it applies also to any offence or contravention hereunder committed outside India by any person.

75 Act to apply for offence or contraventions committed outside India

(1) Subject to the provisions of sub-section (2), the provisions of this Act shall apply also to any offence or contravention committed outside India by any person irrespective of his nationality.

(2) For the purposes of sub-section (1), this Act shall apply to an offence or contravention committed outside India by any person if the act or conduct constituting the offence or contravention involves a computer, computer system or computer network located in India.

The Convention provides for extra territorial jurisdiction only for crimes committed outside the State by nationals of that State. However, the IT Act applies even to offences under the Act committed by foreign nationals outside India, as long as the act involves a computer system or computer network located in India.

Unlike para 3 of Article 22 of the Convention, the IT Act does not touch upon the issue of extradition. Cases involving extradition would therefore be dealt with by the general law of the land in respect of extradition requests contained in the Extradition Act, 1962. The Convention requires that in cases where the state refuses to extradite an alleged offender, it should establish jurisdiction over the offences referred to in Article 21(1) so that it can proceed against that offender itself. In this regard, it must be pointed out that Section 34A of the Extradition Act, 1962 provides that “Where the Central Government is of the opinion that a fugitive criminal cannot be surrendered or returned pursuant to a request for extradition from a foreign State, it may, as it thinks fit, take steps to prosecute such fugitive criminal in India.” Thus the Extradition Act gives the Indian government the power to prosecute an individual in the event that such individual cannot be extradited.

International Cooperation

Chapter III of the Convention deals specifically with international cooperation between the signatory parties. Such co-operation is to be carried out both "in accordance with the provisions of this Chapter" and "through application of relevant international agreements on international cooperation in criminal matters, arrangements agreed to on the basis of uniform or reciprocal legislation, and domestic laws." The latter clause establishes the general principle that the provisions of Chapter III do not supersede the provisions of international agreements on mutual legal assistance and extradition or the relevant provisions of domestic law pertaining to international co-operation.^{^[12]} Although the Convention grants primacy to mutual treaties and agreements between member States, in certain specific circumstances it also provides for an alternative if such treaties do not exist between the member states (Article 27 and 28). The Convention also provides for international cooperation on certain issues which may not have been specifically provided for in mutual assistance treaties entered into between the parties and need to be spelt out due to the unique challenges posed by cyber crimes, such as expedited preservation of stored computer data (Article 29) and expedited disclosure of preserved traffic data (Article 30). Contentious issues such as access to stored computer data, real time collection of traffic data and interception of content data have been specifically left by the Convention to be dealt with as per existing international instruments or arrangements between the parties.

Conclusion

The broad language and wide terminology used IT Act seems to cover a number of the cyber crimes mentioned in the Budapest Convention, even though India has not signed and ratified the same. Penal provisions such as illegal access (Article 2), data interference (Article 4), system interference (Article 5), offence related to child pornography (Article 9), attempt and aiding or abetting (Article 11), corporate liability (Article 12) are substantially covered and reflected in the IT Act in a manner very similar to the requirements of the Convention. Similarly procedural provisions such as search and seizure of stored computer data (Article 19), real-time collection of traffic data (Article 20), interception of content data (Article 21) and Jurisdiction (Article 22) are also substantially reflected in the IT Act.

However certain penal provisions mentioned in the Convention such as computer related forgery (Article 7), computer related fraud (Article 8) are not provided for specifically in the IT Act but such offences are covered when provisions of the Indian Penal Code, 1860 are read in conjugation with provisions of the IT Act. Similarly procedural provisions such as expedited preservation of stored computer data (Article 16) and production order (Article 18) are not specifically provided for in the IT Act but are covered under Indian law through the provisions of the Code of Criminal Procedure, 1973.

Apart from the above two categories there are certain provisions such as misuse of devices (Article 6) and Illegal interception (Article 3) which may not be specifically covered at all under Indian law, but may conceivably be said to be covered through an expansive reading of provisions of the Indian Penal Code and the IT Act. It may therefore be said that even though India has not signed or ratified the Budapest Convention, the legal regime in India is substantially in compliance with the provisions and requirements contained therein.

Thus, the Convention on Cybercrime is perhaps the most important international multi state instruments that may be used to combat cybercrime, not merely because the provisions thereunder may be used as a model to bolster national/local laws by any State, be it a signatory or not (as in the case of India) but also because of the mechanism it lays down for international cooperation in the field of cyber terrorism. In an increasingly interconnected world where more and more information of individuals is finding its way to the cloud or other networked infrastructure the international community is making great efforts to generate norms for increased international cooperation to combat cybercrime and cyber terrorism. While the Convention is one such multilateral effort, States are also proposing to use bilateral treaties to enable them to better fight cybercrime, the United States CLOUD Act, being one such effort. In the backdrop of these novel efforts the role to be played by older instruments such as the Convention on Cybercrime as well as by important States such as India is extremely crucial.

[1] Explanatory Report to the Convention on Cybercrime, Para 304, https://rm.coe.int/16800cce5b.

[2] The analysis here has been limited to only Chapter I and Chapter II of the Convention, as it is only adherence to these two chapters that is required under the CLOUD Act.

[3] The only possible enforcement that may be done with regard to the Convention on Cybercrime is that the Council of Europe may put pressure on the signatory State to amend its local laws (if it is refusing to do so) otherwise it would be in violation of its obligations as a member of the European Union.

[4] Alexander Seger, “India and the Budapest Convention: Why Not?”, https://www.orfonline.org/expert-speak/india-and-the-budapest-convention-why-not/

[5] Explanatory Report to the Convention on Cybercrime, Para 50, https://rm.coe.int/16800cce5b.

[6] India is a party to the Berne Convention on Literary and Artistic Works, the Agreement on Trade Related Intellectual Property Rights and the Rome Convention. India has also recently (July 4, 2018) announced that it will accede to the WIPO Copyright Treaty as well as the WIPO Performances and Phonographs Treaty.

[7] The test under the Convention is that the relevant person would be the one who has a leading position within the company, based on:

a power of representation of the legal person;
an authority to take decisions on behalf of the legal person;
an authority to exercise control within the legal person.

[8]Vipul Kharbanda and Elonnai Hickock, “MLATs and the proposed Amendments to the US Electronic Communications Privacy Act”, https://cis-india.org/internet-governance/blog/mlats-and-the-proposed-amendments-to-the-us-electronic-communications-privacy-act

[9] The term “human rights” has been defined in the Act as “rights relating to life, liberty, equality and dignity of the individual guaranteed by the Constitution or embodied in the International Covenants and enforceable by courts in India”.

[10] Explanatory Report to the Convention on Cybercrime, Para 151, https://rm.coe.int/16800cce5b. .

[11] A similar power of interception is available under section 5 of the Telegraph Act, 1885, but that extends only to interception of telegraphic communication and does not extend to communications exchanged through computer networks.

[12] Explanatory Report to the Convention on Cybercrime, Para 244, https://rm.coe.int/16800cce5b.

For more details visit https://cis-india.org/internet-governance/blog/budapest-convention-and-the-information-technology-act

European E-Evidence Proposal and Indian Law

vipul — 2018-12-23T16:45:02Z

In April of 2018, the European Union issued the proposal for a new regime dealing with cross border sharing of data and information by issuing two draft instruments, an E-evidence Regulation (“Regulation”) and an E-evidence Directive (“Directive”), (together the “E-evidence Proposal”). The Regulation is a direction to states to put in place the proper legislative and regulatory machinery for the implementation of this regime while the Directive requires the states to enact laws governing service providers so that they would comply with the proposed regime.

The main feature of the E-evidence Proposal is twofold: (i) establishment of a legal regime whereunder competent authorities can issue European Production Orders (EPOs) and European Preservation Orders (EPROs) to entities in any other EU member country (together the “Data Orders”); and (ii) an obligation on service providers offering services in any of the EU member countries to designate legal representatives who will be responsible for receiving the Data Orders, irrespective of whether such entity has an actual physical establishment in any EU member country.

In this article we will briefly discuss the framework that has been proposed under the two instruments and then discuss how service providers based in India whose services are also available in Europe would be affected by these proposals. The authors would like to make it clear that this article is not intended to be an analysis of the E-evidence Proposal and therefore shall not attempt to bring out the shortcomings of the proposed European regime, except insofar as such shortcomings may affect the service providers located in India being discussed in the second part of the article.

Part I - E-evidence Directive and Regulation

The E-evidence Proposal introduces the concept of binding EPOs and EPROs. Both Data Orders need to be issued or validated by a judicial authority in the issuing EU member country. A Data Order can be issued to seek preservation or production of data that is stored by a service provider located in another jurisdiction and that is necessary as evidence in criminal investigations or a criminal proceeding. Such Data Orders may only be issued if a similar measure is available for the same criminal offence in a comparable domestic situation in the issuing country. Both Data Orders can be served on entities offering services such as electronic communication services, social networks, online marketplaces, other hosting service providers and providers of internet infrastructure such as IP address and domain name registries. Thus companies such as Big Rock (domain name registry), Ferns n Petals (online marketplace providing services in Europe), Hike (social networking and chatting), etc. or any website which has a subscription based model and allows access to subscribers in Europe would potentially be covered by the E-evidence Proposal. The EPRO, similarly to the EPO, is addressed to the legal representative outside of the issuing country’s jurisdiction to preserve the data in view of a subsequent request to produce such data, which request may be issued through MLA channels in case of third countries or via a European Investigation Order (EIO) between EU member countries. Unlike surveillance measures or data retention obligations set out by law, which are not provided for by this proposal, the EPRO is an order issued or validated by a judicial authority in a concrete criminal proceeding after an individual evaluation of the proportionality and necessity in every single case.^{^[1]} Like the EPO, it refers to the specific known or unknown perpetrators of a criminal offence that has already taken place. The EPRO only allows preserving data that is already stored at the time of receipt of the order, not the access to data at a future point in time after the receipt of the EPRO.

While EPOs to produce subscriber data^{^[2]} and access data^{^[3]} can be issued for any criminal offence an EPO for content data^{^[4]} and transactional data^{^[5]} may only be issued by a judge, a court or an investigating judge competent in the case. In case the EPO is issued by any other authority (which is competent to issue such an order in the issuing country), such an EPO has to be validated by a judge, a court or an investigating judge. In case of an EPO for subscriber data and access data, the EPO may also be validated by a prosecutor in the issuing country.

To reduce obstacles to the enforcement of the EPOs, the Directive makes it mandatory for service providers to designate a legal representative in the European Union to receive, comply with and enforce Data Orders. The obligation of designating a legal representative for all service providers that are operating in the European Union would ensure that there is always a clear addressee of orders aiming at gathering evidence in criminal proceedings. This would in turn make it easier for service providers to comply with those orders, as the legal representative would be responsible for receiving, complying with and enforcing those orders on behalf of the service provider.

Grounds on which EPOs can be issued

The grounds on which Data Orders may be issued are contained in Articles 5 and 6 of the Regulation which makes it very clear that a Data Order may only be issued in a case if it is necessary and proportionate for the purposes of a criminal proceeding. The Regulation further specifies that an EPO may only be issued by a member country if a similar domestic order could be issued by the issuing state in a comparable situation. By using this device of linking the grounds to domestic law, the Regulation tries to skirt around the thorny issue of when and on what basis an EPO may be issued. The Regulation also assigns greater weight (in terms of privacy) to transactional and content data as opposed to subscriber and access data and subjects the production and preservation of the former to stricter requirements. Therefore while Data Orders for access and subscriber data may be issued for any criminal offence, orders for transactional and content data can only be issued in case of criminal offences providing for a maximum punishment of atleast 3 years and above. In addition to that EPOs for producing transactional or content data can also be issued for offences specifically listed in Article 5(4) of the Regulation. These offences have been specifically provided for since evidence for such cases would typically be available mostly only in electronic form. This is the justification for the application of the Regulation also in cases where the maximum custodial sentence is less than three years, otherwise it would become extremely difficult to secure convictions in those offences.^{^[6]}

The Regulation also requires the issuing authority to take into account potential immunities and privileges under the law of the member country in which the service provider is being served the EPO, as well as any impact the EPO may have on fundamental interests of that member country such as national security and defence. The aim of this provision is to ensure that such immunities and privileges which protect the data sought are respected, in particular where they provide for a higher protection than the law of the issuing member country. In such situations the issuing authority “has to seek clarification before issuing the European Production Order, including by consulting the competent authorities of the Member State concerned, either directly or via Eurojust or the European Judicial Network.”

Grounds to Challenge EPOs

Service Providers have been given the option to object to Data Orders on certain limited grounds specified in the Regulation such as, if it was not issued by a proper issuing authority, if the provider cannot comply because of a de facto impossibility or force majeure, if the data requested is not stored with the service provider or pertains to a person who is not the customer of the service provider.^{^[7]} In all such cases the service provider has to inform the issuing authority of the reasons for the inability to provide the information in the specified form. Further, in the event that the service provider refuses to provide the information on the grounds that it is apparent that the EPO “manifestly violates” the Charter of Fundamental Rights of the European Union or is “manifestly abusive”, the service provider shall send the information in specified Form to the competent authority in the member state in which the Order has been received. The competent authority shall then seek clarification from the issuing authority through Eurojust or via the European Judicial Network.^{^[8]}

If the issuing authority is not satisfied by the reasons given and the service provider still refuses to provide the information requested, the issuing authority may transfer the EPO Certificate along with the reasons given by the service provider for non compliance, to the enforcing authority in the addressee country. The enforcing authority shall then proceed to enforce the Order, unless it considers that the data concerned is protected by an immunity or privilege under its national law or its disclosure may impact its fundamental interests such as national security and defence; or the data cannot be provided due to one of the following reasons:

(a) the European Production Order has not been issued or validated by an issuing authority as provided for in Article 4;

(b) the European Production Order has not been issued for an offence provided for by Article 5(4);

(c) the addressee could not comply with the EPOC because of de facto impossibility or force majeure, or because the EPOC contains manifest errors;

(d) the European Production Order does not concern data stored by or on behalf of the service provider at the time of receipt of EPOC;

(e) the service is not covered by this Regulation;

(f) based on the sole information contained in the EPOC, it is apparent that it manifestly violates the Charter or that it is manifestly abusive.

In addition to the above mechanism the service provider may refuse to comply with an EPO on the ground that disclosure would force it to violate a third-country law that either protects “the fundamental rights of the individuals concerned” or “the fundamental interests of the third country related to national security or defence.” Where a provider raises such a challenge, issuing authorities can request a review of the order by a court in the member country. If the court concludes that a conflict as claimed by the service provider exists, the court shall notify authorities in the third-party country and if that third-party country objects to execution of the EPO, the court must set it aside.^{^[9]}

A service provider may also refuse to comply with an order because it would force the service provider to violate a third-country law that protects interests other than fundamental rights or national security and defense. In such cases, the Regulation provides that the same procedure be followed as in case of law protecting fundamental rights or national security and defense, except that in this case the court, rather than notifying the foreign authorities, shall itself conduct a detailed analysis of the facts and circumstances to decide whether to enforce the order.^{^[10]}

Service Provider “Offering Services in the Union”

As is clear from the discussion above, the proposed regime puts an obligation on service providers offering services in the Union to designate a legal representative in the European Union, whether the service provider is physically located in the European Union or not. This appears to be a fairly onerous obligation for small technology companies which may involve a significant cost to appoint and maintain a legal representative in the European Union, especially if the service provider is not located in the EU. Therefore the question arises as to which service providers would be covered by this obligation and the answer to that question lies in the definitions of the terms “service provider” and “offering services in the Union”.

The term service provider has been defined in Article 2(2) of the Directive as follows:

“‘service provider’ means any natural or legal person that provides one or more of the following categories of services:

(a) electronic communications service as defined in Article 2(4) of [Directive establishing the European Electronic Communications Code];^{^[11]}

(b) information society services as defined in point (b) of Article 1(1) of Directive (EU) 2015/1535 of the European Parliament and of the Council^{^[12]} for which the storage of data is a defining component of the service provided to the user, including social networks, online marketplaces facilitating transactions between their users, and other hosting service providers;

(c) internet domain name and IP numbering services such as IP address providers, domain name registries, domain name registrars and related privacy and proxy services;”

Thus broadly speaking the service providers covered by the Regulation would include providers of electronic communication services, social networks, online marketplaces, other hosting service providers and providers of internet infrastructure such as IP address and domain name registries, or on their legal representatives where they exist. An important qualification that has been added in the definition is that it covers only those services where “storage of data is a defining component of the service”. Therefore, services for which the storage of data is not a defining component are not covered by the proposal. The Regulation also recognizes that most services delivered by providers involve some kind of storage of data, especially where they are delivered online at a distance; and therefore it specifically provides that services for which the storage of data is not a main characteristic and is thus only of an ancillary nature would not be covered, including legal, architectural, engineering and accounting services provided online at a distance.^{^[13]}

This does not mean that all such service providers offering the type of services in which data storage is the main characteristic, in the EU, would be covered by the Directive. The term “offering services in the Union” has been defined in Article 2(3) of the Directive as follows:

“‘offering services in the Union’ means:

(a) enabling legal or natural persons in one or more Member State(s) to use the services listed under (3) above; and

(b) having a substantial connection to the Member State(s) referred to in point (a);”

Clause (b) of the definition is the main qualifying factor which would ensure that only those entities whose offering of services has a “substantial connection” which the member countries of the EU would be covered by the Directive. The Regulation recognizes that mere accessibility of the service (which could also be achieved through mere accessibility of the service provider’s or an intermediary’s website in the EU) should not be a sufficient condition for the application of such an onerous condition and therefore the concept of a “substantial connection” was inserted to ascertain a sufficient relationship between the provider and the territory where it is offering its services. In the absence of a permanent establishment in an EU member country, such a “substantial connection” may be said to exist if there are a significant number of users in one or more EU member countries, or the “targeting of activities” towards one or more EU member countries. The “targeting of activities” may be determined based on various circumstances, such as the use of a language or a currency generally used in an EU member country, the availability of an app in the relevant national app store, providing local advertising or advertising in the language used in an EU member country, making use of any information originating from persons in EU member countries in the course of its activities, or from the handling of customer relations such as by providing customer service in the language generally used in EU member countries. A substantial connection can also be assumed where a service provider directs its activities towards one or more EU member countries as set out in Article 17(1)(c) of Regulation 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.^{^[14]}

Part II - EU Directive and Service Providers located in India

In this part of the article we will discuss how companies based in India and running websites providing any “service” such as social networking, subscription based video streaming, etc. such as Hike or AltBalaji, Hotstar, etc. and how such companies would be affected by the E-evidence Proposal. At first glance a website providing a video streaming service may not appear to be covered by the E-evidence Proposal since one would assume that there may not be any storage of data. But if it is a service which allows users to open personal accounts (with personal and possibly financial details such as in the case of TVF, AltBalaji or Hotstar) and uses their online behaviour to push relevant material and advertisements to their accounts, whether that would make the storage of data a defining component of the website’s services as contemplated under the proposal is a question that may not be easy to answer.

Even if it is assumed that the services of an Indian company can be classified as information society services for which the storage of data is a defining component, that by itself would not be sufficient to make the E-evidence Proposal applicable to it. The services of an Indian company would still need to have a “substantial connection” with an EU member country. As discussed above, this substantial connection may be said to exist based on the existence of (i) a significant number of users in one or more EU member countries, or (ii) the “targeting of activities” towards one or more EU member countries. The determination of whether a service provider is targeting its services towards an EU member country is to be made based on a number of factors listed above and is a subjective determination with certain guiding factors.

There does not seem to be clarity however on what would constitute a significant number of users and whether this determination is to be based upon the total number of users in an EU member country as a proportion of the population of the country or is it to be considered as a proportion of the total number of customers the service provider has worldwide. To explain this further let us assume that an Indian company such as Hotstar has a total user base of 100 million customers.^{^[15]} If there is a situation where 10 million of these 100 million subscribers are located in countries other than India, out of which there are about 40 thousand customers in France and another 40 thousand in Malta; then it would lead to some interesting analysis. Now 40 thousand customers in a customer base of 100 million is 0.04% of the total customer base of the service provider which generally speaking would not constitute a “significant number”. However if we reckon the 40 thousand customers from the point of view of the total population of the country of Malta, which is approximately 4.75 Lakh,^{^[16]} it would mean approx. 8.4% of the total population of Malta. It is unlikely that any service affecting almost a tenth of the population of the entire country can be labeled as not having a significant number of users in Malta. If the same math is done on the population of a country such as France, which has a population of approx. 67.3 million,^{^[17]} then the figure would be 0.05% of the total population; would that constitute a significant number as per the E-evidence Proposal.

The issues discussed above are very important for any service provider, specially a small or medium sized company since the determination of whether the E-evidence Proposal applies to them or not, apart from any potential legal implications, imposes a direct economic cost for designating a legal representative in an EU member country. Keeping in mind this economic burden and how it might affect the budget of smaller companies, the Explanatory Memorandum to the Regulation clarifies that this legal representative could be a third party, which could be shared between several service providers, and further the legal representative may accumulate different functions (e.g. the General Data Protection Regulation or e-Privacy representatives in addition to the legal representative provided for by the E-evidence Directive).^{^[18]}

In case all the above issues are determined to be in favour of the E-evidence Directive being applicable to an Indian company and the company designates a legal representative in an EU member country, then it remains to be seen how Indian laws relating to data protection would interact with the obligations of the Indian company under the E-evidence Directive. As per Rule 6 of the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011 (“SPDI Rules”) service providers are not allowed to disclose sensitive personal data or information except with the prior permission of the except disclosure to mandated government agencies. The Rule provides that “the information shall be shared, without obtaining prior consent from provider of information, with Government agencies mandated under the law to obtain information including sensitive personal data or information for the purpose of verification of identity, or for prevention, detection, investigation including cyber incidents, prosecution, and punishment of offences….”. Although the term “government agency mandated under law” has not been defined in the SPDI Rules, the term “law” has been defined in the Information Technology Act, 2000 (“IT Act”) as under:

“’law’ includes any Act of Parliament or of a State Legislature, Ordinances promulgated by the President or a Governor, as the case may be. Regulations made by the President under article 240, Bills enacted as President's Act under sub-clause (a) of clause (1) of article 357 of the Constitution and includes rules, regulations, byelaws and orders issued or made thereunder;”^{^[19]}

Since the SPDI Rules are issued under the IT Act, therefore the term “law” referred as used in the would have to be read as defined in the IT Act (unless court holds to the contrary). This would mean that Rule 6 of the SPDI Rules only recognises government agencies mandated under Indian law and therefore information cannot be disclosed to agencies not recognised by Indian law. In such a scenario an Indian company may not have any option except to raise an objection and challenge an EPO issued to it on the grounds provided in Article 16 of the Regulation, which process itself could mean a significant expenditure on the part of such a company.

Conclusion

The framework sought to be established by the European Union through the E-evidence Proposal seeks to establish a regime different from those favoured by countries such as the United States which favours Mutual Agreements with (presumably) key nations or the push for data localisation being favoured by countries such as India, to streamline the process of access to digital data. Since the regime put forth by the EU is still only at the proposal stage, there may yet be changes which could clarify the regime significantly. However, as things stand Indian companies may be affected by the E-evidence Proposal in the following ways:

Companies offering services outside India may inadvertently trigger obligations under the E-evidence Proposal if their services have a substantial connection with any of the member states of the European Union;
Indian companies offering services overseas will have to make an internal determination as to whether the E-evidence Proposal applies to them or not;
In case of Indian companies which come under the E-evidence Proposal, they would be obligated to designate a legal representative in an EU member state for receiving and executing Data Orders as per the E-evidence Proposal.
If a legal representative is designated by the Indian company they may have to incur significant costs on maintaining a legal representative especially in a situation where they have to object to the implementation of an EPO. The company would also have to coordinate with the legal representative to adequately put forth their (Indian law related) concerns before the competent authority so that they are not forced to fall foul of their legal obligations in either jurisdiction. It is also unclear the extent to which appointed legal representatives from Indian companies could challenge or push back against requests received.

Disclaimer: The author of this Article is an Indian trained lawyer and not an expert on European law. The author would like to apologise for any incorrect analysis of European law that may have crept into this article despite best efforts.

^{^[1]} Explanatory Memorandum to the Proposal for Regulation of the European Parliament and of the Council on European Production and Preservation Orders for Electronic Evidence in Criminal Matters, Pg. 4, available at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52018PC0225&from=EN.

^{^[2]} Subscriber data means data which is used to identify the user and has been defined in Article 2 (7) as follows:

“‘subscriber data’ means any data pertaining to:

(a) the identity of a subscriber or customer such as the provided name, date of birth, postal or geographic address, billing and payment data, telephone, or email;

(b) the type of service and its duration including technical data and data identifying related technical measures or interfaces used by or provided to the subscriber or customer, and data related to the validation of the use of service, excluding passwords or other authentication means used in lieu of a password that are provided by a user, or created at the request of a user;”

^{^[3]} The term access data has been defined in Article 2(8) as follows:

“‘access data’ means data related to the commencement and termination of a user access session to a service, which is strictly necessary for the sole purpose of identifying the user of the service, such as the date and time of use, or the log-in to and log-off from the service, together with the IP address allocated by the internet access service provider to the user of a service, data identifying the interface used and the user ID. This includes electronic communications metadata as defined in point (g) of Article 4(3) of Regulation concerning the respect for private life and the protection of personal data in electronic communications;”

^{^[4]} The term content data has been defined in Article 2 (10) as follows:

“‘content data’ means any stored data in a digital format such as text, voice, videos, images, and sound other than subscriber, access or transactional data;”

^{^[5]} The term transactional data has been defined in Article 2(9) as follows:

“‘transactional data’ means data related to the provision of a service offered by a service provider that serves to provide context or additional information about such service and is generated or processed by an information system of the service provider, such as the source and destination of a message or another type of interaction, data on the location of the device, date, time, duration, size, route, format, the protocol used and the type of compression, unless such data constitues access data. This includes electronic communications metadata as defined in point (g) of Article 4(3) of [Regulation concerning the respect for private life and the protection of personal data in electronic communications];”

^{^[6]} Explanatory Memorandum to the Proposal for Regulation of the European Parliament and of the Council on European Production and Preservation Orders for Electronic Evidence in Criminal Matters, Pg. 17, available at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52018PC0225&from=EN.

^{^[7]} Articles 9(4) and 10(5) of the Regulation.

^{^[8]} Article 10(5) of the Regulation.

^{^[9]} Article 15 of the Regulation.

^{^[10]} Article 16 of the Regulation. Also see https://www.insideprivacy.com/uncategorized/eu-releases-e-evidence-proposal-for-cross-border-data-access/.

^{^[11]} Article 2(4) of the Directive establishing European Electronic Communications Code provides as under:

‘electronic communications service’ means a service normally provided for remuneration via electronic communications networks, which encompasses 'internet access service' as defined in Article 2(2) of Regulation (EU) 2015/2120; and/or 'interpersonal communications service'; and/or services consisting wholly or mainly in the conveyance of signals such as transmission services used for the provision of machine-to-machine services and for broadcasting, but excludes services providing, or exercising editorial control over, content transmitted using electronic communications networks and services;”

^{^[12]} Information Society Services have been defined in the Directive specified as “any Information Society service, that is to say, any service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services.”

^{^[13]} Proposal for a Directive of the European Parliament and of the Council Laying Down Harmonised Rules on the Appointment of Legal Representatives for the Purpose of Gathering Evidence in Criminal Proceedings, Pg 8, available at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52018PC0226&from=EN.

^{^[14]} Proposal for a Directive of the European Parliament and of the Council Laying Down Harmonised Rules on the Appointment of Legal Representatives for the Purpose of Gathering Evidence in Criminal Proceedings, Pg 9, available at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52018PC0226&from=EN.

^{^[15]} Hotstar already has an active customer base of 75 million, as of December, 2017; https://telecom.economictimes.indiatimes.com/news/netflix-restricted-to-premium-subscribers-hotstar-leads-indian-ott-content-market/62351500

^{^[16]} https://en.wikipedia.org/wiki/Malta

^{^[17]} https://en.wikipedia.org/wiki/France

^{^[18]} Proposal for a Directive of the European Parliament and of the Council Laying Down Harmonised Rules on the Appointment of Legal Representatives for the Purpose of Gathering Evidence in Criminal Proceedings, Pg 5, available at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52018PC0226&from=EN.

^{^[19]} Section 2(y) of the Information Technology Act, 2000.

For more details visit https://cis-india.org/internet-governance/blog/vipul-kharbanda-december-23-2018-european-e-evidence-proposal-and-indian-law

Are Indian Consumer Laws Ready for the Digital Age?

vipul — 2013-08-08T11:52:40Z

The Economic and Social Council of the United Nations, recognizing the need for protection of the rights of consumers, drafted a set of model guidelines on consumer protection which were adopted by the General Assembly in 1985. The United Nations Guidelines for Consumer Protection (UNGCP) act as an international reference point of the consumer movement, however since it has been over a quarter of a century since they were first drafted, there is a strong argument for revising them to bring them in line with new developments in technology and business practices.

It is for this reason that that United Nations Conference on Trade and Development has undertaken a revision of the UNGCP. Consumers International, an international consumer rights organization has along with CIS and other groups been trying to represent the voice of consumers at the negotiations for this revision. As part of this effort, Consumers International has produced a book titled "Updating the UN Guidelines for Consumer Protection for Consumers in the Digital Age". This blog has been produced through a filteration of the essence of some of the arguments and issues addressed in that book.

In December 2012 there was a news report that pegged the market for online commerce in India at roughly USD 14 billion,[1] which is why some of the poster children of online retail in India are getting stratospheric valuations even though they are yet to show any major profits, case in point, Flipkart had a valuation of around USD 800 million[2] in 2012 and is looking for an IPO in around three to four years. Such huge numbers give a sneak peek into the size and scope of the Indian e-commerce marketplace which begs the question, if there are so many transactions occurring in the online marketplace and since a large number of those transactions are between retailers and domestic consumers, then are there any specific laws out there protecting the interests of consumers in the online world.

Apart from the Information Technology Act, 2000 and various circulars by the Reserve Bank of India regarding online banking and money transfer activities which are more generic in nature trying to secure the online space as a whole, there are no specific laws that seek to protect consumers in the online space. However, that does not necessarily mean that the consumers are left without any recourse and in this post we shall examine whether it is possible to use the Consumer Protection Act, 1986 to protect consumer rights in the online environment as well.

The Consumer Protection Act, 1986 (“COPRA”) was enacted with the purpose of empowering consumers to take on the might of large corporations and preventing unscrupulous businessmen from taking undue advantage of the weak position which consumers are inherently placed in under the archaic Indian judicial system. It set up special tribunals, simpler procedures and enacted special provisions to help consumers get a better bargaining position vis-à-vis manufacturers and retailers, etc. However, since this law was enacted more than a quarter of a century ago and it is not entirely geared towards protecting consumer rights in the digital era. However, that does not mean it is entirely toothless in the online environment although it certainly needs some major provisions to come to grasp with the special circumstances and practices of the online marketplace, as the rest of the discussion will demonstrate.

For any transaction to come under the purview of COPRA, it should have the following three essential requirements:

There should be a ‘good’ or ‘service’ sold or provided to a consumer;
Such good or service must be ‘sold’ i.e. there must be a ‘sale’;
There should be a ‘defect’ in the good or ‘deficiency’ in the service;

We will now examine different types of e-commerce transactions and discuss whether they fulfill the requirements given above and therefore are amenable to the jurisdiction of COPRA.

There should be a ‘good’ or ‘service’
This is issue is not very complicated so far as digital purchases of physical items are concerned. Since a book or a mobile phone is considered as a ‘good’ then it will always be considered as a ‘good’ irrespective of whether it has been bought from a physical shop or an online retailer. However, the question does take on an air of some complexity when dealing with digital items such as mp3 files and software programmes. The General Clauses Act, 1897 states that all property which is not immovable property is considered as movable property. Since immovable property is defined as land and things attached to the land, therefore it is pretty clear that ‘computer software’ would in all likelihood be considered as movable property. Whether such movable property can be considered as a ‘good’ or not is a question which is yet to be tested in the courts of law in India, however it must be mentioned that in the context of the Sales Tax Act, the Supreme Court of India has held canned software to be a ‘good’. Laying down a test for determining whether a property is a ‘good’ or not, the Supreme Court in that case laid down the following test:

“A 'goods' may be a tangible property or an intangible one. It would become goods provided it has the attributes thereof having regard to (a) its utility; (b) capable of being bought and sold; and (c) capable of transmitted, transferred, delivered, stored and possessed. If a software whether customized or non-customized satisfies these attributes, the same would be goods.”[3]

It must be emphasized again that the Supreme Court’s ruling was given in the context of the Sales Tax Act and it may not be accepted by a court deciding a case on COPRA. This is one issue which could and should be addressed under Indian laws to ensure that the large numbers of Indian consumers who buy items in the online marketplace are not left in a lurch and without the protection of the COPRA.

There must be a “Sale” of the good or service
Just as the previous issue, this question again can be simple when asked in relation to sale of physical goods using the internet but may not be so when talking about digital goods. When a physical item is purchased using the internet, a sale may be said to have occurred when the ownership of the good passes from the seller (online retailer) to the buyer (consumer) and the payment and delivery are complete. However, the question whether sale of software (here we are using this generic term for all sorts of computer programmes and data because the reasoning and legal analysis can be applied to both types of data) in an online environment would actually constitute a ‘sale’ requires a little more analysis. A huge problem in labeling online software purchases as a ‘sale’ is that most of these ‘sales’ are made in the form of a license. The manufacturers or retailers would argue that such an online purchase is not really a sale since the consumer usually only gets a license to use the product under strict conditions and does not buy the product as an owner, further this is really the industry standard when it comes to software purchases. The argument on the other side is that most websites advertise these products as an outside sale, for example, if you go to the Quick Heal antivirus website today and go to the page for “Home Users”[4] the page clearly shows a “Buy Now” tab and indicates the price at Rs. 1549/-. In fact in a number of cases you can actually buy the file containing the software without ever being shown the contractual terms of the agreement. These terms usually specify that you are only getting a license to use the product and may not have the right to resell or lend the product to others, rights which a traditional buyer of a product enjoys under law.

This issue was also discussed by a Full Bench of the Supreme Court of India in the case of Tata Consultancy Services v. State of Andhra Pradesh,[5] which ultimately held that the ‘sale’ of canned software (the term the court used for non customized software which is sold off the shelf) would be a sale of goods and therefore liable to be taxed under the Sales Tax Act. As is evident this decision was given in the context of the Sales Tax Act, but it could be argued that since tax statues are anyways supposed to be interpreted strictly and beneficial statutes such as the COPRA are required to be interpreted broadly, as per the accepted rules of legal interpretation, therefore it is possible that such a ‘license’ for computer software bought by an ordinary consumer could be considered as a ‘sale’ so as to bring the item within the ambit of the COPRA.

Here again we see that although there might be arguments which could be made to justify such licences for computer software as a ‘sale’, however it is still an untested issue and the COPRA certainly needs to take these issues into account if we want to protect the rights of the ever growing number of online consumers.

There should be a “defect” in the goods
If I order a pair of shoes from flpikart.com and the shoes arrive with one of the soles torn off, it’s a pretty straightforward case of there being a defect. In such a scenario unless the retailer has a specified return policy (which incidentally flipkart has) the consumer would have a right to approach the consumer forum to lodge a compliant. Similarly, if I buy a software from a manufacturer for my personal use and the file has a bug in it, it can fairly easily be considered as a defect since any fault, imperfection or shortcoming in the quality, quantity, potency, purity or standard or the good can be considered as a defect.

This is where things get a little interesting. What if we argue that stringent Digital Rights Management techniques by some online retailers are actually a defect in the goods since they do give the consumer all the rights that a buyer of goods would traditionally have. For example, if I buy an e-book with DRMs which restrict lending and on-selling, then two of my rights as a traditional book buyer are straightaway rescinded. Let us now examine the issue in the traditional context of the term ‘defect’.

If an article bought has any fault, imperfection or shortcoming in the quality, etc., then it would be considered as a defective good. For example, if a person buys a generator which is creating excessive noise, then it can be said that there is a shortcoming in the quality or the standard which is required to be maintained. A generator may supply electricity perfectly well and there may not be any fault at the time of running the machine but while operating the machine if it is creating more noise than the prescribed level, it can be said that there is a defect in the manufacture. An e-book with DRMs may also let a consumer read its contents but that may not be the only criteria to determine whether an item is defective or not. Using the traditional definition of a ‘buyer’, we can argue that a traditional buyer commonly has rights such as the right to resale, the right to make copies for personal use, the right to lend, the right to gift, etc., which may not exist in a an e-book with DRMs. Thus, an argument could be made that such measures constitute a ‘defect’ in the goods under the COPRA.

Again, this is only an argument and it is entirely possible that a court of law may reject such an argument, especially in light of the fact that the consumer has entered into a license agreement while completing the transaction which specifically grants the consumer only specific and limited rights in regard to the item being purchased. A possible counter to this argument could be that the agreement is generally long and verbose and is only presented to the consumer towards the end of the transaction when the consumer generally does not have the time to read it. Further, there is hardly ever a situation where the consumer can negotiate the terms of the contract, it is usually a standard form of contract which is heavily tilted in favour of the seller and the consumer is given no real choice in this regard. This is why in common law jurisdictions the courts have laid down certain principles or extra conditions which a standard form of contract has to abide by for it to be enforceable viz.,:

Sufficient notice: This principle requires that the major and specially the unusual terms in a contract should be displayed in a sufficiently highlighted manner so that a reasonable consumer is not likely to miss these unusual terms.[6]
Fundamental breach of contract: If the contract is so drafted that it would impose additional obligations on the consumer or restrict the liability and obligations of the seller in such a way that it would result in breaching any of the fundamental or main terms or obligations that one expects in such a contract, then such a contract may not be enforceable.[7]
Exclusion of unreasonable terms: Another type of protection that is available to consumers is the principle which seeks to exclude unreasonable terms from a contract i.e. a term which would defeat the very purpose of the contract or if it is repugnant to the public policy.[8]

Relying on the above principles of standard form contracts, it is possible to at least argue that highly strict and limiting terms which are put into a long verbose standard form contract which backs the Technology Protection Measures on a protected software may not be entirely enforceable, in which case the alleged consent of the consumer for such DRMs gets negated and the software with all its DRM limitations could be considered as ‘defective’.

Conclusion
From the discussion above it is clear that the nature of online transactions and digital goods presents certain unique problems for the legal regime which seeks to protect consumer rights. The law needs to be amended to take into account the unique circumstances of this fledging marketplace that exists online and ensure that the legal regime is fully capable of facing the challenges thrown up by e-commerce. One of the initiatives in this regard is the effort by Consumers International to include amendments in the Model United Nations Guidelines for Consumer Protection to include various provisions which deal with the online marketplace and its unique challenges as well as issues relating to access to knowledge (A2K). Perhaps it is time for the establishment in India to also take this into account and bring our quarter of a century old consumer protection legislation in line with the digital age.

[1]. http://goo.gl/Mh74vB

[2]. http://goo.gl/By5x3i

[3]. Tata Consultancy Services v. State of Andhra Pradesh, 5 November, 2004, available at http://goo.gl/Bn7KRp

[4]. http://goo.gl/lMdoI

[5].http://goo.gl/Bn7KRp

[6]. Henderson & others v. Stevenson, 1875 2 R (HL) 71, Interfoto Picture Library Ltd v. Stiletto Visual Programmes Ltd. [1988] 1 All ER 348.

[7]. Harbutt's "Plasticine" Ltd. v. Wayne Tank and Pump Co Ltd [1970] 1 QB 447.

[8]. Lily White v. R. Mannuswami, AIR 1966 Mad.13.

For more details visit https://cis-india.org/a2k/blogs/are-indian-consumers-laws-ready-for-digital-age

Can Bitcoin Be Banned by the Indian Government?

vipul — 2017-04-07T12:56:21Z

The paper analyses the laws and regulations that apply to Bitcoin in India, and comes to the conclusion that the government has wide powers that it can exercise, if it wishes, to regulate Bitcoin. Given the lack of existing legal and regulatory analysis on this issue in India, we greatly welcome comments on this issue.

Bitcoin: Legal Treatment under the Current Indian Legal and Regulatory Regime

This paper is an effort to examine the legal basis and treatment of Bitcoin under the current legal and regulatory regime in India. It seeks to explore whether Indian laws and regulations as they stand today would even consider Bitcoin as ‘currency’ and which regulations would govern different kinds of Bitcoin transactions. In this paper we shall first give a brief description of Bitcoin and then move on to what its legal treatment would most likely be which would then lead us to examine which regulations would most likely apply to various Bitcoin transactions.

What is Bitcoin?

Bitcoin is a cryptography based digital currency first described in a 2008 paper by a single or group of pseudonymous developer(s) by the name of Satoshi Nakamoto, who called it a “peer-to-peer, electronic cash system”. Bitcoin creation and transfer is based on an open source cryptographic protocol and is not managed by any central authority. Each Bitcoin is subdivided down to eight decimal places, forming 100,000,000 smaller units called satoshis. Bitcoins can be transferred through a computer or smartphone without an intermediate financial institution. The processing of Bitcoin transactions is secured by servers called Bitcoin “miners”. These servers communicate over an internet-based network and confirm transactions by adding them to a ledger which is updated and archived periodically using peer-to-peer filesharing technology, also known as the “blockchain”. The integrity and chronological order of the blockchain is enforced with cryptography. In addition to archiving transactions, each new ledger update creates some newly-minted Bitcoins. The number of new Bitcoins created in each update is halved every 4 years until the year 2140 when this number will round down to zero. At that time no more Bitcoins will be added into circulation and the total number of Bitcoins will have reached a maximum of 21 million Bitcoins.

Each user of Bitcoin gets a digital wallet and a Bitcoin address which is the address from and to which Bitcoins can be transferred once this address is given to another party for the transfer. A transaction or transfer of Bitcoins is simply a transfer of value between Bitcoin addresses that gets included in the block chain or the system log, which ensures that each transaction is valid and that nobody can use his or her Bitcoins more than once i.e. it avoids double spending.. Bitcoin wallets keep a secret piece of data called a “private key” for each Bitcoin address. Private keys are used to sign transactions, providing a mathematical proof that they have come from the owner of the addresses. The “signature” also prevents the transaction from being altered by anybody once it has been issued.

With this very basic and brief understanding of Bitcoin, we shall now try to examine whether Bitcoins should be treated under Indian law as (i) currency, (ii) security, (iii) derivative, (iv) negotiable instrument, (v) prepaid payment instrument, or (vi) movable property.

Can Bitcoins be Treated as Currency?

Indian laws do not define digital currency or virtual currency, so we will have to look at the traditional definition of currency to see if Bitcoin falls in that definition. The term currency is defined in section 2(h) of the Foreign Exchange Management Act, 1999 (“FEMA”) in the following words:

“currency” includes all currency notes, postal notes, postal orders, money orders, cheques, drafts, travellers cheques, letters of credit, bills of exchange and promissory notes, credit cards or such other similar instruments, as may be notified by the Reserve Bank;

It is notable here that this is an inclusive definition which means that it has a large scope for expansion. The legislature has consciously made the definition capable of further expansion by making it inclusive and also by giving the Reserve Bank of India (“RBI”) the authority to notify other similar instruments. This means that if any instrument which is being used as a currency is not covered by the definition as it stands, then the RBI is free to notify it and include it in the definition of currency. All “currency” other than Indian currency is considered by the FEMA as “foreign currency” which would have to then comply with various rules and regulations under FEMA. This means that if Bitcoin is classified as a “currency”, it would have to come under the definition of “foreign currency” and Bitcoin transactions would therefore have to comply with the entire foreign exchange regime under FEMA.

It is clear that Bitcoin is not really similar to any of the instruments mentioned in the definition, not least because none of them are digital or virtual in nature. On May 3, 2000 the RBI notified “debit cards, ATM cards or any other instrument that can be used to create a financial liability” as “currency” under the FEMA (by Notification No. FEMA 15/2000/RB dated May 3, 2001). Since Bitcoin is not really backed by any institution and has no backing by any central bank or institution and because most of the transactions involving acceptance of Bitcoin are voluntary in nature, therefore it does not seem that Bitcoin is an instrument that can be used to create a financial liability. This can be explained further with the help of two examples:

(i) If a person owns Indian rupee notes worth Rs. 500 and everyone stops accepting the currency, he can always go to the Governor of the RBI and claim Rs. 500 from him, however if I own Bitcoins then whether my Bitcoins can be used to buy any goods or services is entirely dependant upon the willingness of third parties to accept Bitcoin as a valuable item.

(ii) If I order a pair of shoes worth Rs. 500 from flipkart.com and pay for those shoes using Indian currency, then it does not matter if flipkart decides to not accept Indian currency (whether by means of cash, credit card, cheque, etc.) and accepts payment only in Bitcoins. As soon as I give flipkart currency notes or coins worth Rs. 500, my legal obligation to pay for the shoes is fulfilled. On the other hand if I pay for those shoes with Bitcoins then unless flipkart voluntarily accepts payment in Bitcoin, my liability to pay for the shoes will still legally exist till I pay flipkart Rs. 500 in Indian currency.

Therefore it is clear that Bitcoins do not fit into the plain vanilla definition of currency under Indian law. However this does not mean that the RBI cannot regulate Bitcoins or transactions involving Bitcoins. The RBI can very well notify Bitcoins as “currency” and then come out with rules and regulations for Bitcoin transactions. Cynics may argue that this is not possible due to the peer to peer nature of Bitcoins and the Bitcoin network and they would be right to the extent that it may not be physically feasible for the RBI to regulate every Bitcoin transaction, but it would be possible for them to target Bitcoin exchanges which is the entry point for most users of Bitcoin. To sum up, although Bitcoins may not be classified as a currency at present, this does not preclude the RBI from regulating them in the future.

Can Bitcoins be considered as Securities?

The term “securities” is defined in section 2 (h) of the Securities Contracts (Regulation) Act, 1955 in the following manner: “securities” include —

(i) shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate;

(ia) derivative;

(ib) units or any other instrument issued by any collective investment scheme to the investors in such schemes;

(ic) security receipt as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;

(id) units or any other such instrument issued to the investors under any mutual fund scheme;

(ii) Government securities;

(iia) such other instruments as may be declared by the Central Government to be securities; and

(iii) rights or interest in securities;”

It is clear from a bare reading of this definition that Bitcoin does not come within any of the parts of the definition of securities, other than possibly ‘derivative’ (which is something we shall examine in the next part of this paper). Apart from the term derivative, the only other way in which Bitcoins can be brought under the definition of ‘securities’ is if the Central Government notifies Bitcoins as such since the Central Government has the power to declare any instrument as a ‘security’. In such a scenario it will be the entire gamut of regulations governing securities including the various rules and regulations prescribed by the Securities and Exchange Board of India (SEBI). Another argument is that Bitcoin may fall under the definition of a “derivative”.

Can Bitcoins be considered as a Derivatives or a Negotiable Instruments?

The definition of “derivative” under the SCRA is

(ac) “derivative” includes— (A) a security derived from a debt instrument, share, loan, whether secured or unsecured, risk instrument or contract for differences or any other form of security; (B) a contract which derives its value from the prices, or index of prices, of underlying securities;

As discussed above, Bitcoin is not a security and therefore would not satisfy the first part of the definition of “derivative” within the SCRA. Further since Bitcoin is only a voluntary currency based on two parties deciding that the code itself has some value, therefore Bitcoin can also not be described as a contract which derives its value from the prices or index of prices of underlying securities. Therefore it is clear that Bitcoin would not satisfy the requirements of being a derivative under the SCRA. Under Indian law, another definition of the term derivative is provided under the Reserve Bank of India Act, 1934 which defines “derivative” in section 17(6A) to mean:

an instrument, to be settled at a future date, whose value is derived from change in one or a combination of more than one of the following underlyings, namely:--

(a) interest rate,

(b) price of securities of the Central Government or a State Government or of such securities of a local authority as may be specified in this behalf by the Central Government,

(c) price of foreign securities,

(d) foreign exchange rate,

(e) index of rates or prices,

(f) credit rating or credit index,

(g) price of gold or silver coins, or gold or silver bullion, or

(h) any other variable of similar nature.

Since Bitcoins are used as currency because Bitcoin users think it has inherent and not because its value is derived from any other underlying thing or object, therefore Bitcoin cannot be said to fall under the definition of “derivative” under the Reserve Bank of India Act, 1934 either.

The term negotiable instrument on the other hand is defined in the Negotiable Instruments Act, 1881 and defines a negotiable instrument as a “promissory note, bill of exchange or cheque payable either to order or to bearer”. Since the terms promissory note, bill of exchange or cheque are easily understood in trading parlance, there is no need to go into the definitions of these instruments as provided under the Negotiable Instruments Act, 1881, suffice it to say that Bitcoins do not fall under the definitions of any of these terms under the Act.

Can Bitcoin be Classified as a Prepaid Payment Instrument?

The enactment of the Payment and Settlement Systems Act, 2007 has brought the payment systems involved in the issuance of prepaid payment instruments under the regulatory jurisdiction of the RBI. In exercise of its powers under Section 18 of the Payment and Settlement Systems Act, 2007 the RBI on April 27, 2009 issued policy guidelines governing institutions issuing prepaid payment instruments such as mobile wallets, Paypal, etc. In these guidelines the term Prepaid Payment Instrument is defined in the following words:

Pre-paid payment instruments are payment instruments that facilitate purchase of goods and services against the value stored on such instruments. The value stored on such instruments represents the value paid for by the holders by cash, by debit to a bank account, or by credit card…

Since Prepaid Payment Instruments have a definite value stored on them which is equal to the amount paid by the holders in cash or by debit or credit card, it seems that Bitcoins cannot be classified as Prepaid Payment Instruments since there is no static value stored in Bitcoins, rather they have an inherent value. In other words the amount of money that a person pays to buy Bitcoin does not represent the value of the Bitcoins that the person is buying, rather the value (or exchange rate) of Bitcoins keeps changing on a daily basis. Therefore Bitcoins cannot be classified as prepaid payment instruments because the value stored on prepaid instruments such as Paypal is always constant and is equal to the amount of money paid to the system to get a Paypal balance, but this is not the case with Bitcoins.

What can Bitcoins be Classified As?

As discussed above, Bitcoins cannot be classified as regular financial instruments such as ‘currency’, ‘security’, ‘derivative’ or ‘negotiable instruments’ as these instruments are currently defined under Indian law. What therefore, should be the legal treatment of Bitcoins under Indian law? Bitcoins are essentially lines of code which create the system of transfer of Bitcoin currency from one account to another. The Indian Copyright Act defines the term “computer programme” as “a set of instructions expressed in words, codes, schemes or in any other form, including a machine readable medium, capable of causing a computer to perform a particular task or achieve a particular result”. Based on this definition as well as the generally understood meaning of computer programme it would be fairly safe to say that Bitcoins would fall under the definition of the term “computer programme”. Now the General Clauses Act, 1897 defines the term movable property as property of every description, except immovable property. Immovable property has been defined to include land, benefits arising out of land or things attached to the earth or permanently fastened to anything attached to the earth. Clearly a computer programme would not fit into the definition of immovable property and relying upon the broad definition of movable property in the General Clauses Act, 1897 it can be said that a computer programme and by logical extension Bitcoins should be considered as movable property. Further the Forward Contracts (Regulation) Act, 1952 also defines goods to mean “every kind of movable property other than actionable claims, money and securities”. It would seem that on a bare reading, Bitcoins would also fulfill this condition and be generally defined as goods under Indian law.

Now that we have determined that Bitcoins would in all likelihood be treated as goods or movable property under the current legal regime in India, it would be beneficial to discuss what laws would regulate the various Bitcoin transactions that occur in general practice, for the purposes of this paper we shall limit our discussion to the following transactions:

i) Mining of Bitcoins; ii) Transfer of Bitcoins from one person to another within the territory of India; iii) Exchange of Bitcoins for Indian Rupees, provided the entire transaction is based in India; iv) Transfer of Bitcoins from one person to another where the person sending the Bitcoins is not resident in India; v) Exchange of Bitcoins for Indian Rupees, where the exchange is based outside India.

Mining of Bitcoins

Since Bitcoins are essentially lines of code and therefore would fall within the definition of “computer programme”, the mining of Bitcoins is essentially the utilization of one’s own computing power and electricity to generate more computer programmes or an extension of an existing computer programme. Thus Bitcoin ‘mining’ would be like making your own computer programme and there is no law which prevents or prohibits a person from doing so, therefore it seems that mining Bitcoins in India would be a perfectly permissible and legal activity.

Transfer of Bitcoins from one person to another within the territory of India

Although we have determined above that Bitcoins would in all probability be treated as goods and therefore any sale of Bitcoins would be governed by the Sale of Goods Act, 1930 however it must be noted that the Sale of Goods Act does not regulate barter transactions. This is so because the sale of goods means a contract whereby the property in the goods is actually transferred by the seller to the buyer and according to section 4 of the Sale of Goods Act the transfer of the property in the goods is for a price, i.e., for money consideration. As price is an essential element of a contract of sale, barter is ruled out from a transaction of sale of goods. This means that any transaction whereby payment is made in Bitcoins would come within the category of a barter transaction, for example if flipkart.com starts accepting payment in Bitcoin then the transaction of paying for a pair of shoes through Bitcoin would infact be a barter transaction and would not be governed by the Sale of Goods Act.

Exchange of Bitcoins for Indian Rupees, provided the entire transaction is based in India

In case there is an online Bitcoin exchange where one can buy or sell Bitcoins using real currency (such as Mt.Gox) based in India which deals only with Indian residents and buys or sells Bitcoins for Indian Rupees, then as per our discussion above all the transactions of this online exchange would be governed by the Sale of Goods Act and all relevant laws regarding sale of goods on an exchange platform with regard to goods such as computer programmes would be applicable to such an online exchange including the Forward Contracts (Regulation) Act, 1952. (As noted above, Bitcoins would satisfy the definition of ‘goods’ within the Forward Contracts (Regulation) Act, 1952.) This would imply that as long as the online exchange does plain vanilla buying and selling of Bitcoins it would not be amenable to regulatory oversight but if it wants to offer Bitcoin derivatives such as Bitcoin futures then it would have to get itself registered as per the provisions of the Forward Contracts (Regulation) Act and also follow all the rules and regulations prescribed thereunder.

Transfer of Bitcoins from one person to another where the person sending the Bitcoins is not resident in India

If Bitcoins are transferred from a person residing outside India to a person resident within India then that would amount to import of computer programmes within India. If this transfer is done in return for the Indian party sending an item or rendering a service to the foreign party then this would be a barter transaction. It is useful to note that although the Indian import and customs regulations do not mention barter transactions, the guidance on the website of the Directorate General of Valuation, Central Board of Excise and Customs, Government of India seems to suggest that barter transactions for import of goods although are not prohibited but do present unique problems of valuation of the goods. However since software imported online does not attract any duty under Indian law, therefore it would be immaterial to discuss exactly how a barter transaction involving Bitcoins should be valued under the Indian customs regime. For the purposes of this discussion it is sufficient to note that a Bitcoin transaction entered into by an Indian with a party outside India is not prohibited as long as the item or service being exported out of India is itself legal and above board. For example, a transaction involving an Indian designing a website for a person sitting in Australia and being paid in Bitcoin would be legal whereas sending contraband substances to the same person while getting paid in Bitcoin would not be allowed. This would be the legal analysis for a general citizen but this analysis is subject to regulations governing specific instances, for example exchange or goods or items from certain countries may be declared illegal or the receipt of foreign articles by certain class of entities may be banned or otherwise regulated, such as political parties or Non Governmental Oorganisations (“NGOs”).

Can an NGO based in India receive donations in Bitcoin?

This is an interesting question because it would be perfectly legal for a regular citizen to receive Bitcoins from abroad as a gift or donation, etc. However if the entity receiving such Bitcoins is an NGO then there would be the added layer of regulation from the Foreign Contributions Regulation Act, 2010 (“FCRA”) which regulates all foreign contributions received by NGOs. Section 2(1)(h) of the FCRA defines foreign contribution to include the receipt of any article from a foreign source. This means that even if an NGO based in India receives contribution from a foreign source in Bitcoins, such a transaction would fall within the regulatory ambit of the FCRA and any such a transaction would have to be reported to the Ministry of Home Affairs in Form FC – 7 under Rule 17(3) of the Rules under the FCRA.

Exchange of Bitcoins for Indian Rupees, where the exchange is based outside India

If a person imports a computer programme into India he would have to pay the customs duty at the prevalent rates, however if this import of software is done via the internet and does not involve any physical shipments (e.g. downloading paid software from the internet) then no import duty is levied on the import of computer software in India. This would mean that any person buying a computer programme or software from a vendor abroad would not be liable to pay any customs duty or file any documentation with the customs authorities in India. This situation would also be applicable to any person buying Bitcoins from an online exchange based outside India. The only documentation that would be required for buying Bitcoins from an online exchange abroad would be that which the bank may insist upon for exchanging Indian rupees into a foreign currency and then transferring it to an overseas account. This documentation would involve filing of Form A-1 if the total value of the money being exchanged is greater than USD 5,000 however if the amount of money being exchanged is less than USD 5,000 then the person is only required to give a simple letter containing basic information viz. the name and the address of the applicant, name and address of the beneficiary, amount to be remitted and the purpose of remittance. If the transaction is done using a credit card then in most instances, banks would not be insist upon this letter since these transactions usually go through their automated channels.

Conclusion

Although Bitcoins can currently be classified only as movable property and more specifically as computer software, this position is not tested in a Court of law. Further it appears from the analysis of the definitions of ‘currency’ and ‘prepaid payment instrument’ that the government has the power to bring Bitcoins into the definition of either currency or prepaid payment instrument by just amending the regulations, which is not a very cumbersome process since financial regulations, by their very nature, are quite fluid and prone to changes. Even so it is worth noting that even as the legal regime stands now offering of derivative products in Bitcoins might require registration and approval under the Forward Contracts Regulation Act.

It is worth noting that unlike other digital currencies such as e-gold, liberty reserve, etc. Bitcoin is a peer to peer network based currency which does not have one centralized agency or institution regulating the entire system and therefore an argument is made that even if the agencies want to regulate or shut it down they will not physically be able to do so as there is no nodal institution that the authorities can go after. However this argument is fallacious to a certain extent in that the authorities can go after online exchanges which are websites or portals run by individuals or entities which have a physical manifestation. They would have names, addresses, bank accounts, etc. and the authorities could easily go after the major exchanges to cut off the supply or cash into the Bitcoin system by attacking the source where cash or ‘real currency’ enters or leaves the system thereby severely reducing the efficacy of Bitcoins.

Looking at the relatively small number of people who use Paypal or other e-wallets in India, it would not be entirely unlikely that the regulations to govern Bitcoin, whenever they come, would be a reaction to a particular event and whether these regulations are enabling or disabling in nature would probably depend upon the nature of the event to which they are reacting.

Note: Although not referred to here because of the limited context of this paper, a similar and much more thorough examination of the legality of Bitcoins done by Nokolei M. Kaplanov in the article titled Nerdy Money: Bitcoin, the Private Digital Currency, and the Case Against Its Regulation in the Temple Law Review.

For more details visit https://cis-india.org/internet-governance/bitcoin-legal-regulation-india

The Aadhaar Case

vipul — 2014-09-05T09:12:21Z

In 2012 a writ petition was filed by Justice K.S. Puttaswamy in the Supreme Court of India challenging the policy of the government in making an Aadhaar card for every person in India and its later plans to link various government benefit schemes to the same.

Over time a number of other cases have been filed in the Supreme Court challenging the Aadhaar mechanism and/or its procedure most of which have now been linked to the main petition filed by Justice Puttaswamy.[1] This means that the Supreme Court now hears all these cases together (i.e. at the same time) since they throw up similar questions and involve the same or similar issues. The court while hearing the case made an interim order on September 23, 2013 whereby it ordered that no person should suffer on account of not having an Aadhaar card and that Aadhaar cards should not be issued to any illegal immigrants. The relevant extract from the Order of the court is reproduced below:

"No person should suffer for not getting the Aadhaar card in spite of the fact that some authority had issued a circular making it mandatory and when any person applies to get the Aadhaar card voluntarily, it may be checked whether that person is entitled for it under the law and it should not be given to any illegal immigrant."[2]

It must be noted that the above order was only an interim measure taken by the Supreme Court till the time it finally decided all the issues involved in the case, which is still pending in the Supreme Court.

In November 2013 during one of the hearings of the matter, the Supreme Court came to the conclusion that it was an important enough matter for all the states and union territories to be impleaded as parties to the case and passed an order to this effect.[3] This was probably because the Aadhaar cards will be issued in the entire country and this is a national issue and therefore it is possible that the court thought that if any of the states have any concerns regarding the issue they should have the opportunity to present their case.

In another petition filed by the Unique Identification Authority of India (UIDAI), the Supreme Court on March 24, 2014 reiterated its earlier order and held that no person shall be deprived of any service just because such person lacked an aadhaar number if he/she was otherwise eligible for the service. A direction was issued to all government authorities and departments to modify their forms/circulars, etc., so as to not compulsorily require an aadhaar number. In the same order the Supreme Court also restrained the UIDAI from transferring any biometric data to any agency without the consent of the person in writing as an interim measure.[4] After passing these orders the Supreme Court linked this case as well to the petition filed by Justice Puttaswamy on which final arguments were being heard in February 2014 which so far do not seem to have concluded.

Note : Please note that the case is still being heard by the Supreme Court and the orders given so far and explained in this blog are all interim measures till the case is finally disposed off. The status of the cases can be seen on the following link:

http://courtnic.nic.in/supremecourt/casestatus_new/caseno_new_alt.asp

The names and number of the cases that have been covered in this blog are given below:

W.P(C) No. 439 of 2012 titled S. Raju v. Govt. of India and Others pending before the D.B. of the High Court of Judicature at Madras.
PIL No. 10 of 2012 titled Vickram Crishna and Others v. UIDAI and Others pending before the High Court of Judicature at Bombay.
W.P. No. 833 of 2013 titled Aruna Roy & Anr v. Union of India & Ors.
W.P. No. 829 of 2013 titled S.G. Vombatkere & Anr v. Union of India & Ors.
Petition(s) for Special Leave to Appeal (Crl) No(s).2524/2014 titled Unique Identification Authority of India & another v. Central Bureau of Investigation.

All the above cases have now been linked with the ongoing Supreme Court case of K. Puttaswamy v. Union of India.

[1] W.P(C) No. 439 of 2012 titled S. Raju v. Govt. of India and Others pending before the D.B. of the High Court of Judicature at Madras and PIL No. 10 of 2012 titled Vickram Crishna and Others v. UIDAI and Others pending before the High Court of Judicature at Bombay were transferred to the Supreme Court vide Order dated September 23, 2013. Also W.P. No. 833 of 2013 titled Aruna Roy & Anr Vs Union of India & Ors, W.P. No. 829 of 2013 titled S G Vombatkere & Anr Vs Union of India & Ors and Petition(s) for Special Leave to Appeal (Crl) No(s).2524/2014 titled Unique Identification Authority of India & another v. Central Bureau of Investigation.

[2] http://judis.nic.in/temp/494201232392013p.txt

[3] http://judis.nic.in/temp/4942012326112013p.txt

[4] http://courtnic.nic.in/supremecourt/temp/sr%20252414p.txt

For more details visit https://cis-india.org/internet-governance/blog/the-aadhaar-case

Comments on the Draft Second Protocol to the Convention on Cybercrime (Budapest Convention)

vipul — 2019-02-25T16:43:43Z

For more details visit https://cis-india.org/internet-governance/comments-on-the-draft-second-protocol-to-the-convention-on-cybercrime-budapest-convention

The Gujarat High Court Judgment on the Snoopgate Issue

vipul — 2014-10-27T04:40:17Z

Pranlal N. Soni v. State of Gujarat, C/SCA/14389/2014

In the year 2013 the media widely reported that a female civil services officer was regularly spied upon in 2009 due to her acquaintance with the then Chief Minister of Gujarat (and current Prime Minister of India) Mr. Narendra Modi. It was reported that the surveillance was being supervised by the current president of the BJP, Mr. Amit Shah at the behest of Mr. Modi. The case took another twist when the officer and her father said that they had no problems with such surveillance, and had repeatedly conveyed to various statutory authorities including the National Commission for Women, the State Commission for Women, as also before the Hon’ble Supreme Court of India, that they never felt that their privacy was being interfered with by any of the actions of the State Authorities. Infact, para 3.5 of the petition indicated that it was at the behest of the father of the female officer that the State government had carried out the surveillance on his daughter as a security measure.

Inspite of the repeated claims of the subject of surveillance and her father, the Gujarat Government passed a Notification under the Commissions of Inquiry Act, 1952 appointing a two member Commission of Inquiry to enquire into this incident without jeopardizing the identity or interest of the female officer. This Notification was challenged in the Gujarat High Court by the very same female officer and her father on the ground that it violated their fundamental right to life and liberty. The petitioners claimed that they had to change their residential accommodation four times in the preceding few months due to the constant media glare. The print, electronic and social media, so called social workers and other busybodies constantly intruded into the private life of the petitioners and their family members. The petitioner's email accounts were hacked and scores of indecent calls were received from all over. Under the guise of protecting the petitioner's privacy, every action undertaken by the so called custodians for and on behalf of the petitioners resulted into a breach of privacy of the petitioners, making life impossible for them on a day to day basis.

After hearing the arguments of the petitioners, including arguments on technical points the Court struck down the Notification issued by the State government to enquire into the issue of the alleged illegal surveillance. However the Court also briefly touched upon the issue of violation of the privacy of the female officer in this whole episode. However, instead of enquiring into whether there was any breach of privacy in the facts of the case, the Court relied upon the statement made by the female officer that whatever surveillance was done did not cause any invasion into her privacy, rather it was the unwelcome media glare that followed the revelations regarding the surveillance which had caused an invasion of her privacy.

Thus we see that even though the whole snoopgate episode started out as one of “alleged” unwarranted and illegal surveillance this particular judgment is limited only to challenging the validity of the Inquiry Commission appointed by the State Government. In order to challenge the Notification in a PIL the female officer had to show that some fundamental right of hers was violated and in such circumstances privacy is the most obvious fundamental right which was violated.

Although this judgment talks about privacy, it does not have enough legal analysis of the right to privacy to have any significant ramifications for how privacy is interpreted in the Indian context. The only issue that could possibly be of some importance is that the we could interpret the Court’s reliance on the statement of the female officer that there was no breach of privacy rather than its own examination of facts to mean that in cases of breach of privacy, if the person whose privacy has been breached did not feel his or her privacy to have been invaded then the Courts would rely on the person’s statements rather than the facts. However this is only an interpretation from the facts and it does not seem that the Court has spent any significant amount of time to examine this issue, therefore it may not be prudent to consider this as establishing any legal principle.

Note: The details of the case as well as the judgment can be found at http://gujarathc-casestatus.nic.in/gujarathc/tabhome.jsp

For more details visit https://cis-india.org/internet-governance/blog/gujarat-high-court-judgment-on-snoopgate-issue

Transparency in Surveillance

vipul — 2016-01-23T15:11:18Z

Transparency is an essential need for any democracy to function effectively. It may not be the only requirement for the effective functioning of a democracy, but it is one of the most important principles which need to be adhered to in a democratic state.

Introduction

A democracy involves the state machinery being accountable to the citizens that it is supposed to serve, and for the citizens to be able to hold their state machinery accountable, they need accurate and adequate information regarding the activities of those that seek to govern them. However, in modern democracies it is often seen that those in governance often try to circumvent legal requirements of transparency and only pay lip service to this principle, while keeping their own functioning as opaque as possible.

This tendency to not give adequate information is very evident in the departments of the government which are concerned with surveillance, and merit can be found in the argument that all of the government's clandestine surveillance activities cannot be transparent otherwise they will cease to be "clandestine" and hence will be rendered ineffective. However, this argument is often misused as a shield by the government agencies to block the disclosure of all types of information about their activities, some of which may be essential to determine whether the current surveillance regime is working in an effective, ethical, and legal manner or not. It is this exploitation of the argument, which is often couched in the language of or coupled with concerns of national security, that this paper seeks to address while voicing the need for greater transparency in surveillance activities and structures.

In the first section the paper examines the need for transparency, and specifically deals with the requirement for transparency in surveillance. In the next part, the paper discusses the regulations governing telecom surveillance in India. The final part of the paper discusses possible steps that may be taken by the government in order to increase transparency in telecom surveillance while keeping in mind that the disclosure of such information should not make future surveillance ineffective.

Need for Transparency

In today's age where technology is all pervasive, the term "surveillance" has developed slightly sinister overtones, especially in the backdrop of the Edward Snowden fiasco. Indeed, there have been several independent scandals involving mass surveillance of people in general as well as illegal surveillance of specific individuals. The fear that the term surveillance now invokes, especially amongst those social and political activists who seek to challenge the status quo, is in part due to the secrecy surrounding the entire surveillance regime. Leaving aside what surveillance is carried out, upon whom, and when - the state actors are seldom willing and open to talk about how surveillance is carried out, how decisions regarding who and how to target, are reached, how agency budgets are allocated and spent, how effective surveillance actions were, etc. While there may be justified security based arguments to not disclose the full extent of the state's surveillance activities, however this cloak of secrecy may be used illegally and in an unauthorized manner to achieve ends more harmful to citizen rights than the maintenance of security and order in the society.

Surveillance and interception/collection of communications data can take place under different legal processes in different countries, ranging from court-ordered requests of specified data from telecommunications companies to broad executive requests sent under regimes or regulatory frameworks requiring the disclosure of information by telecom companies on a pro-active basis. However, it is an open secret that data collection often takes place without due process or under non-legal circumstances.

It is widely believed that transparency is a critical step towards the creation of mechanisms for increased accountability through which law enforcement and government agencies access communications data. It is the first step in the process of starting discussions and an informed public debate regarding how the state undertakes activities of surveillance, monitoring and interception of communications and data. Since 2010, a large number of ICT companies have begun to publish transparency reports on the extent that governments request their user data as well as requirements to remove content. However, governments themselves have not been very forthcoming in providing such detailed information on surveillance programs which is necessary for an informed debate on this issue.[1] Although some countries currently report limited information on their surveillance activities, e.g. the U.S. Department of Justice publishes an annual Wiretap Report (U.S. Courts, 2013a), and the United Kingdom publishes the Interception of Communications Commissioner Annual Report (May, 2013), which themselves do not present a complete picture, however even such limited measures are unheard of in a country such as India.

It is obvious that Governments can provide a greater level of transparency regarding the limits in place on the freedom of expression and privacy than transparency reports by individual companies. Company transparency reports can only illuminate the extent to which any one company receives requests and how that company responds to them. By contrast, government transparency reports can provide a much greater perspective on laws that can potentially restrict the freedom of expression or impact privacy by illustrating the full extent to which requests are made across the ICT industry. [2]

In India, the courts and the laws have traditionally recognized the need for transparency and derive it from the fundamental right to freedom of speech and expression guaranteed in our Constitution. This need coupled with a sustained campaign by various organizations finally fructified into the passage of the Right to Information Act, 2005, (RTI Act) which amongst other things also places an obligation on the sate to place its documents and records online so that the same may be freely available to the public. In light of this law guaranteeing the right to information, the citizens of India have the fundamental right to know what the Government is doing in their name. The free flow of information and ideas informs political growth and the freedom of speech and expression is the lifeblood of a healthy democracy, it acts as a safety valve. People are more ready to accept the decisions that go against them if they can in principle seem to influence them. The Supreme Court of India is of the view that the imparting of information about the working of the government on the one hand and its decision affecting the domestic and international trade and other activities on the other is necessary, and has imposed an obligation upon the authorities to disclose information.[3]

The Supreme Court, in Namit Sharma v. Union of India,[4] while discussing the importance of transparency and the right to information has held:

"The Right to Information was harnessed as a tool for promoting development; strengthening the democratic governance and effective delivery of socio-economic services. Acquisition of information and knowledge and its application have intense and pervasive impact on the process of taking informed decision, resulting in overall productivity gains .

……..

Government procedures and regulations shrouded in the veil of secrecy do not allow the litigants to know how their cases are being handled. They shy away from questioning the officers handling their cases because of the latters snobbish attitude. Right to information should be guaranteed and needs to be given real substance. In this regard, the Government must assume a major responsibility and mobilize skills to ensure flow of information to citizens. The traditional insistence on secrecy should be discarded."

Although these statements were made in the context of the RTI Act the principle which they try to illustrate can be understood as equally applicable to the field of state sponsored surveillance. Though Indian intelligence agencies are exempt from the RTI Act, it can be used to provide limited insight into the scope of governmental surveillance. This was demonstrated by the Software Freedom Law Centre, who discovered via RTI requests that approximately 7,500 - 9,000 interception orders are sent on a monthly basis.[5]

While it is true that transparency alone will not be able to eliminate the barriers to freedom of expression or harm to privacy resulting from overly broad surveillance,, transparency provides a window into the scope of current practices and additional measures are needed such as oversight and mechanisms for redress in cases of unlawful surveillance. Transparency offers a necessary first step, a foundation on which to examine current practices and contribute to a debate on human security and freedom.[6]

It is no secret that the current framework of surveillance in India is rife with malpractices of mass surveillance and instances of illegal surveillance. There have been a number of instances of illegal and/or unathorised surveillance in the past, the most scandalous and thus most well known is the incident where a woman IAS officer was placed under surveillance at the behest of Mr. Amit Shah who is currently the president of the ruling party in India purportedly on the instructions of the current prime minister Mr. Narendra Modi.[7] There are also a number of instances of private individuals indulging in illegal interception and surveillance; in the year 2005, it was reported that Anurag Singh, a private detective, along with some associates, intercepted the telephonic conversations of former Samajwadi Party leader Amar Singh. They allegedly contacted political leaders and media houses for selling the tapped telephonic conversation records. The interception was allegedly carried out by stealing the genuine government letters and forging and fabricating them to obtain permission to tap Amar Singh's telephonic conversations. [8] The same individual was also implicated for tapping the telephone of the current finance minister Mr. Arun Jaitely.[9]

It is therefore obvious that the status quo with regard to the surveillance mechanism in India needs to change, but this change has to be brought about in a manner so as to make state surveillance more accountable without compromising its effectiveness and addressing legitimate security concerns. Such changes cannot be brought about without an informed debate involving all stakeholders and actors associated with surveillance, however the basic minimum requirement for an "informed" debate is accurate and sufficient information about the subject matter of the debate. This information is severely lacking in the public domain when it comes to state surveillance activities - with most data points about state surveillance coming from news items or leaked information. Unless the state becomes more transparent and gives information about its surveillance activities and processes, an informed debate to challenge and strengthen the status quo for the betterment of all parties cannot be started.

Current State of Affairs

Surveillance laws in India are extremely varied and have been in existence since the colonial times, remnants of which are still being utilized by the various State Police forces. However in this age of technology the most important tools for surveillance exist in the digital space and it is for this reason that this paper shall focus on an analysis of surveillance through interception of telecommunications traffic, whether by tracking voice calls or data. The interception of telecommunications actually takes place under two different statutes, the Telegraph Act, 1885 (which deals with interception of calls) as well as the Information Technology Act, 2000 (which deals with interception of data).

Currently, the telecom surveillance is done as per the procedure prescribed in the Rules under the relevant sections of the two statutes mentioned above, viz. Rule 419A of the Telegraph Rules, 1951 for surveillance under the Telegraph Act, 1885 and the Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009 for surveillance under the Information Technology Act, 2000. These Rules put in place various checks and balances and try to ensure that there is a paper trail for every interception request. [10] The assumption is that the generation of a paper trail would reduce the number of unauthorized interception orders thus ensuring that the powers of interception are not misused. However, even though these checks and balances exist on paper as provided in the laws, there is not enough information in the public domain regarding the entire mechanism of interception for anyone to make a judgment on whether the system is working or not.

As mentioned earlier, currently the only sources of information on interception that are available in the public domain are through news reports and a handful of RTI requests which have been filed by various activists.[11] The only other institutionalized source of information on surveillance in India is the various transparency reports brought out by companies such as Google, Yahoo, Facebook, etc.

Indeed, Google was the first major corporation to publish a transparency report in 2010 and has been updating its report ever since. The latest data that is available for Google is for the period between January, 2015 to June, 2015 and in that period Google and Youtube together received 3,087 requests for data which asked for information on 4,829 user accounts from the Indian Government. Out of these requests Google only supplied information for 44% of the requests.[12] Although Google claims that they "review each request to make sure that it complies with both the spirit and the letter of the law, and we may refuse to produce information or try to narrow the request in some cases", it is not clear why Google rejected 56% of the requests. It may also be noted that the number of requests for information that Google received from India were the fifth highest amongst all the other countries on which information was given in the Transparency Report, after USA, Germany, France and the U.K.

Facebook's transparency report for the period between January, 2015 to June, 2015 reveals that Facebook received 5,115 requests from the Indian Government for 6,268 user accounts, out of which Facebook produced data in 45.32% of the cases.[13] Facebook's transparency report claims that they respond to requests relating to criminal cases and "Each and every request we receive is checked for legal sufficiency and we reject or require greater specificity on requests that are overly broad or vague." However, even in Facebook's transparency report it is unclear why 55.68% of the requests were rejected.

The Yahoo transparency report also gives data from the period between January 1, 2015 to June 30, 2015 and reveals that Yahoo received 831 requests for data, which related to 1,184 user accounts from the Indian Government. The Yahoo report is a little more detailed and also reveals that 360 of the 831 requests were rejected by Yahoo, however no details are given as to why the requests were rejected. The report also specifies that in 63 cases, no data was found by Yahoo, in 249 cases only non content data[14] was disclosed while in 159 cases content [15] was disclosed. The Yahoo report also claims that "We carefully scrutinize each request to make sure that it complies with the law, and we push back on those requests that don't satisfy our rigorous standards."

While the Vodafone Transparency Report gives information regarding government requests for data in other jurisdictions, [16] it does not give any information on government requests in India. This is because Vodafone interprets the provisions contained in Rule 25(4) of the IT (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009 (Interception Rules) and Rule 11 of the IT (Procedure and Safeguards for Monitoring and Collecting Traffic Data or Information) Rules, 2009 as well as Rule 419A(19) of the Indian Telegraph Rules, 1954 which require service providers to maintain confidentiality/secrecy in matters relating to interception, as being a legal prohibition on Vodafone to reveal such information.

Apart from the four major companies discussed above, there are a large number of private corporations which have published transparency reports in order to acquire a sense of trustworthiness amongst their customers. Infact, the Ranking Digital Rights Project has been involved in ranking some of the biggest companies in the world on their commitment to accountability and has brought out the Ranking Digital Rights 2015 Corporate Accountability Index that has analysed a representative group of 16 companies "that collectively hold the power to shape the digital lives of billions of people across the globe".

Suggestions on Transparency

It is clear from the discussions above, as well as a general overview of various news reports on the subject, that telecom surveillance in India is shrouded in secrecy and it appears that a large amount of illegal and unauthorized surveillance is taking place behind the protection of this veil of secrecy. If the status quo continues, then it is unlikely that any meaningful reforms would take place to bring about greater accountability in the area of telecom surveillance. It is imperative, for any sort of changes towards greater accountability to take place, that we have enough information about what exactly is happening and for that we need greater transparency since transparency is the first step towards greater accountability.

Transparency Reports

In very simplistic terms transparency, in anything, can best be achieved by providing as much information about that thing as possible so that there are no secrets left. However, it would be naïve to say that all information about interception activities can be made public on the altar of the principle of transparency, but that does not mean that there should be no information at all on interception. One of the internationally accepted methods of bringing about transparency in interception mechanisms, which is increasingly being adopted by both the private sector as well as governments, is to publish Transparency Reports giving various details of interception while keeping security concerns in mind. The two types of transparency reports that we require in India and what that would entail is briefly discussed below:

By the Government

The problem with India's current regime for interception is that the entire mechanism appears more or less adequate on paper with enough checks and balances involved in it to prevent misuse of the allotted powers. However, because the entire process is veiled in secrecy, nobody knows exactly how good or how rotten the system has become and whether it is working to achieve its intended purposes. It is clear that the current system of interception and surveillance being followed by the government has some flaws, as can be gathered from the frequent news articles which talk about incidents of illegal surveillance. However, without any other official or more reliable sources of information regarding surveillance activities these anecdotal pieces of evidence are all we have to shape the debate regarding surveillance in India. It is only logical then that the debate around surveillance, which is informed by such sketchy and unreliable news reports will automatically be biased against the current mechanism since the newspapers would also only be interested in reporting the scandalous and the extraordinary incidents. For example, some argue that the government undertakes mass surveillance, while others argue that India only carries out targeted surveillance, but there is not enough information publicly available for a third party to support or argue against either claim. It is therefore necessary and highly recommended that the government start releasing a transparency report such as the one's brought out by the United States and the UK as mentioned above.

There is no need for a separate department or authority just to make the transparency report and this task could probably be performed in-house by any department, but considering the sector involved, it would perhaps be best if the Department of Telecommunications is given the responsibility to bring out a transparency report. These transparency reports should contain certain minimum amount of data for them to be an effective tool in informing the public discourse and debate regarding surveillance and interception. The report needs to strike a balance between providing enough information so that an informed analysis can be made of the effectiveness of the surveillance regime without providing so much information so as to make the surveillance activities ineffective. Below is a list of suggestions as to what kind of data/information such reports should contain:

Reports should contain data regarding the number of interception orders that have been passed. This statistic would be extremely useful in determining how elaborate and how frequently the state indulges in interception activities. This information would be easily available since all interception orders have to be sent to the Review Committee set up under Rule 419A of the Telegraph Rules, 1954.
The Report should contain information on the procedural aspects of surveillance including the delegation of powers to different authorities and individuals, information on new surveillance schemes, etc. This information would also be available with the Ministry of Home Affairs since it is a Secretary or Joint Secretary level officer in the said Ministry which is supposed to authorize every order for interception.
The report should contain an aggregated list of reasons given by the authorities for ordering interception. This information would reveal whether the authorities are actually ensuring legal justification before issuing interception or are they just paying lip service to the rules to ensure a proper paper trail. Since every order of interception has to be in writing, the main reasons for interception can easily be gleaned from a perusal of the orders.
It should also reveal the percentage of cases where interception has actually found evidence of culpability or been successful in prevention of criminal activities. This one statistic would itself give a very good review of the effectiveness of the interception regime. Granted that this information may not be very easily obtainable, but it can be obtained with proper coordination with the police and other law enforcement agencies.
The report should also reveal the percentage of order that have been struck down by the Review Committee as not following the process envisaged under the various Rules. This would give a sense of how often the Rules are being flouted while issuing interception orders. This information can easily be obtained from the papers and minutes of the meetings of the Review Committee.
The report should also state the number of times the Review Committee has met in the period being reported upon. The Review Committee is an important check on the misuse of powers by the authorities and therefore it is important that the Review Committee carries out its activities in a diligent manner.

It may be noted here that some provisions of the Telegraph Rules, 1954 especially sub-Rules 17 and 18 of Rule 419A as well as Rules 22, 23(1) and 25 of the Information Technology (Procedure and Safeguards for Monitoring and Collecting Traffic Data or Information) Rules, 2009 may need to be amended so as to make them compliant with the reporting mechanism proposed above.

By the Private Sector

We have already discussed above the transparency reports published by certain private companies. Suffice it to say that reports from private companies should give as much of the information discussed under government reports as possible and/or applicable, since they may not have a large amount of the information that is sought to be published in the government reports such as whether the interception was successful, the reasons for interception, etc. It is important to have ISPs provide such transparency reports as this will provide two different data points for information on interception and the very existence of these private reports may act as a check to ensure the veracity of the government transparency reports.

As in the case of government reports, for the transparency reports of the private sector to be effective, certain provisions of the Telegraph Rules, 1954 and the Information Technology (Procedure and Safeguards for Monitoring and Collecting Traffic Data or Information) Rules, 2009, viz. sub-Rules 14, 15 and 19 of Rule 419A of the Telegraph Rules, 1954 and Rules 20, 21, 23(1) and 25 of the Information Technology (Procedure and Safeguards for Monitoring and Collecting Traffic Data or Information) Rules, 2009.

Overhaul of the Review Committee

The Review Committee which acts as a check on the misuse of powers by the competent authorities is a very important cog in the entire process. However, it is staffed entirely by the executive and does not have any members of any other background. Whilst it is probably impractical to have civilian members in the Review Committee which has access to potentially sensitive information, it is extremely essential that the Committee has wider representation from other sectors specially the judiciary. One or two members from the judiciary on the Review Committee would provide a greater check on the workings of the Committee as this would bring in representation from the judicial arm of the State so that the Review Committee does not remain a body manned purely by the executive branch. This could go some ways to ensure that the Committee does not just "rubber stamp" the orders of interception issued by the various competent authorities.

Conclusion

It is not in dispute that there is a need for greater transparency in the government's surveillance activities in order to address the problems associated with illegal and unauthorised interceptions. This paper is not making the case that greater transparency in and by itself will be able to solve the problems that may be associated with the government's currency interception and surveillance regime, however it is not possible to address any problem unless we know the real extent of it. It is essential for an informed debate and discussion that the people participating in the discussion are "informed", i.e. they should have accurate and adequate information regarding the issues which are being discussed. The current state of the debate on interception is rife with individuals using illustrative and anecdotal evidence which, in the absence of any other evidence, they assume to be the norm.

A more transparent and forthcoming state machinery which regularly keeps its citizens abreast of the state of its surveillance regime would be likely to get better suggestions and perhaps less criticisms if it does come out that the checks and balances imposed in the regulations are actually making a difference to check unauthorized interceptions, and if not, then it is the right of the citizens to know about this and ask for reforms.

[1] James Losey, "Surveillance of Communications: A Legitimization Crisis and the Need for Transparency", International Journal of Communication 9(2015), Feature 3450-3459, 2015.

[2] Id.

[3] Namit Sharma v. Union of India, http://www.judis.nic.in/supremecourt/imgs1.aspx?filename=39566.

[4] http://www.judis.nic.in/supremecourt/imgs1.aspx?filename=39566 . Although the judgment was overturned on review, however this observation quoted above would still hold as it has not been specifically overturned.

[5] http://sflc.in/wp-content/uploads/2014/09/SFLC-FINAL-SURVEILLANCE-REPORT.pdf .

[6] James Losey, "Surveillance of Communications: A Legitimization Crisis and the Need for Transparency", International Journal of Communication 9 (2015), Feature 3450-3459, 2015.

[7] http://gulail.com/the-stalkers/ .

[8] http://timesofindia.indiatimes.com/india/Amar-Singh-phone-tap-accused-tracked-Arun-Jaitleys-mobile/articleshow/18582508.cms .

[9] http://ibnlive.in.com/news/arun-jaitley-phonetapping-case-all-accused-get-bail/394997-37-64.html .

[10] For a detailed discussion of the Rules of interception please see Policy Paper on Surveillance in India, by Vipul Kharbanda, http://cis-india.org/internet-governance/blog/policy-paper-on-surveillance-in-india .

[11] As an example please see http://cis-india.org/internet-governance/resources/rti-on-officials-and-agencies-authorized-to-intercept-telephone-messages-in-india .

[12] https://www.google.com/transparencyreport/userdatarequests/countries/ .

[13] https://govtrequests.facebook.com/country/India/2015-H1/ .

[14] Non-content data (NCD) such as basic subscriber information including the information captured at the time of registration such as an alternate e-mail address, name, location, and IP address, login details, billing information, and other transactional information (e.g., "to," "from," and "date" fields from email headers).

[15] Data that users create, communicate, and store on or through Yahoo. This could include words in a communication (e.g., Mail or Messenger), photos on Flickr, files uploaded, Yahoo Address Book entries, Yahoo Calendar event details, thoughts recorded in Yahoo Notepad or comments or posts on Yahoo Answers or any other Yahoo property.

[16] https://www.vodafone.com/content/sustainabilityreport/2014/index/operating_responsibly/privacy_and_security/law_enforcement/country_by_country.html .

For more details visit https://cis-india.org/internet-governance/blog/transparency-in-surveillance

Policy Paper on Surveillance in India

vipul — 2015-08-03T15:27:41Z

This policy brief analyses the different laws regulating surveillance at the State and Central level in India and calls out ways in which the provisions are unharmonized. The brief then provides recommendations for the harmonization of surveillance law in India.

Introduction

The current legal framework for surveillance in India is a legacy of the colonial era laws that had been drafted by the British. Surveillance activities by the police are an everyday phenomenon and are included as part of their duties in the various police manuals of the different states. It will become clear from an analysis of the laws and regulations below, that whilst the police manuals cover the aspect of physical surveillance in some detail, they do not discuss the issue of interception of telephone or internet traffic. These issues are dealt with separately under the Telecom Act and the Information Technology Act and the Rules made thereunder, which are applicable to all security agencies and not just the police. Since the Indian laws deal with different aspects of surveillance under different legislations, the regulations dealing with this issue do not have any uniform standards. This paper therefore argues that the need of the hour is to have a single legislation which deals with all aspects of surveillance and interception in one place so that there is uniformity in the laws and practices of surveillance in the entire country.

Legal Regime

India does not have one integrated policy on surveillance and law enforcement and security agencies have to rely upon a number of different sectoral legislations to carry out their surveillance activities. These include:

1. Police Surveillance under Police Acts and Model Police Manual

Article 246(3) of the Constitution of India, read with Entry 2, List II, of the VIIth Schedule, empowers the States to legislate in matters relating to the police. This means that the police force is under the control of the state government rather than the Central government. Consequently, States have their own Police Acts to govern the conduct of the police force. Under the authority of these individual State Police Acts, rules are formulated for day-to-day running of the police. These rules are generally found in the Police Manuals of the individual states. Since a discussion of the Police Manual of each State with its small deviations is beyond the scope of this study, we will discuss the Model Police Manual issued by the Bureau of Police Research and Development.

As per the Model Police Manual, “surveillance and checking of bad characters” is considered to be one of the duties of the police force mentioned in the “Inventory of Police Duties, Functions and Jobs”.[1] Surveillance is also one of the main methods utilized by the police for preventing law and order situations and crimes.[2] As per the Manual the nature and degree of surveillance depends on the circumstances and persons on whom surveillance is mounted and it is only in very rare cases and on rare occasions that round the clock surveillance becomes necessary for a few days or weeks.[3]

Surveillance of History Sheeted Persons: Beat Police Officers should be fully conversant with the movements or changes of residence of all persons for whom history sheets of any category are maintained. They are required to promptly report the exact information to the Station House Officer (SHO), who make entries in the relevant registers. The SHO on the basis of this information reports, by the quickest means, to the SHO in whose jurisdiction the concerned person/persons are going to reside or pass through. When a history-sheeted person is likely to travel by the Railway, intimation of his movements should also be given to the nearest Railway Police Station.[4] It must be noted that the term “history sheet” or “history sheeter” is not defined either in the Indian Penal Code, 1860, most of the State Police Acts or the Model Police Manual, but it is generally understood and defined in the Oxford English Dictionary as persons with a criminal record.

Surveillance of “Bad Characters”: Keeping tabs on and getting information regarding “bad characters” is part of the duties of a beat constable. In the case of a “bad character” who is known to have gone to another State, the SHO of the station in the other state is informed using the quickest means possible followed by sending of a BC Roll 'A' directly to the SHO.[5] When a “bad character” absents himself or goes out of view, whether wanted in a case or not, the information is required to be disseminated to the police stations having jurisdiction over the places likely to be visited by him and also to the neighbouring stations, whether within the State or outside. If such person is traced and intimation is received of his arrest or otherwise, arrangements to get a complete and true picture of his activities are required to be made and the concerned record updated.[6]

The Police Manual clarifies the term “bad characters” to mean “offenders, criminals, or members of organised crime gangs or syndicates or those who foment or incite caste, communal violence, for which history sheets are maintained and require surveillance.”[7] A fascinating glimpse into the history of persons who were considered to be “bad characters” is contained in the article by Surjan Das & Basudeb Chattopadhyay in EPW[8] wherein they bring out the fact that in colonial times a number of the stereotypes propagated by the British crept into their police work as well. It appears that one did not have to be convicted to be a bad character, but people with a dark complexion, strong built, broad chins, deep-set eyes, broad forehead, short hair, scanty or goatee beard, marks on face, moustache, blunt nose, white teeth and monkey-face would normally fit the description of “bad characters”.

Surveillance of Suspicious Strangers: When a stranger of suspicious conduct or demeanour is found within the limits of a police station, the SHO is required to forward a BC Roll to the Police Station in whose jurisdiction the stranger claims to have resided. The receipt of such a roll is required to be immediately acknowledged and replied. If the suspicious stranger states that he resides in another State, a BC Roll is sent directly to the SHO of the station in the other State.[9] The manual however, does not define who a “suspicious stranger” is and how to identify one.

Release of Foreign Prisoners: Before a foreign prisoner (whose finger prints are taken for record) is released the Superintendent of Police of the district where the case was registered is required to send a report to the Director, I.B. through the Criminal Investigation Department informing the route and conveyance by which such person is likely to leave the country.[10]

Shadowing of convicts and dangerous persons: The Police Manual contains the following rules for shadowing the convicts on their release from jails:

(a) Dangerous convicts who are not likely to return to their native places are required to be shadowed. The fact, when a convict is to be shadowed is entered in the DCRB in the FP register and communicated to the Superintendent of Jails.

(b) The Police Officer deputed for shadowing an ex-convict is required to enter the fact in the notebook. The Police Officers area furnished with a challan indicating the particulars of the ex-convict marked for shadowing. This form is returned by the SHO of the area where the ex-convict takes up his residence or passes out of view to the DCRB / OCRS where the jail is situated, where it is put on record for further reference and action if any. Even though the subjects being shadowed are kept in view, no restraint is to put upon their movements on any account.[11]

Apart from the provisions discussed above, there are also provisions in the Police Manual regarding surveillance of convicts who have been released on medical grounds as well as surveillance of ex-convicts who are required to report their movements to the police as per the provisions of section 356 of the Code of Criminal Procedure.[12]

As noted above, the various police manuals are issued under the State Police Acts and they govern the police force of the specific states. The fact that each state has its own individual police manual itself leads to non-uniformity regarding standards and practices of surveillance. But it is not only the legislations at the State levels which lead to this problem, even legislation at the Central level, which are applicable to the country as a whole also have differing standards regarding different aspects of surveillance. In order to explore this further, we shall now discuss the central legislations dealing with surveillance.

2. The Indian Telegraph Act, 1885

Section 5 of the Indian Telegraph Act, 1885, empowers the Central Government and State Governments of India to order the interception of messages in two circumstances: (1) in the occurrence of any public emergency or in the interest of public safety, and (2) if it is considered necessary or expedient to do so in the interest of:[13]

the sovereignty and integrity of India; or
the security of the State; or
friendly relations with foreign states; or
public order; or
for preventing incitement to the commission of an offence.

The Supreme Court of India has specified the terms 'public emergency' and 'public safety', based on the following[14]:

"Public emergency would mean the prevailing of a sudden condition or state of affairs affecting the people at large calling for immediate action. The expression 'public safety' means the state or condition of freedom from danger or risk for the people at large. When either of these two conditions are not in existence, the Central Government or a State Government or the authorised officer cannot resort to telephone tapping even though there is satisfaction that it is necessary or expedient so to do in the interests of it sovereignty and integrity of India etc. In other words, even if the Central Government is satisfied that it is necessary or expedient so to do in the interest of the sovereignty and integrity of India or the security of the State or friendly relations with sovereign States or in public order or for preventing incitement to the commission of an offence, it cannot intercept the message, or resort to telephone tapping unless a public emergency has occurred or the interest of public safety or the existence of the interest of public safety requires. Neither the occurrence of public emergency nor the interest of public safety are secretive conditions or situations. Either of the situations would be apparent to a reasonable person."

In 2007, Rule 419A was added to the Indian Telegraph Rules, 1951 framed under the Indian Telegraph Act which provided that orders on the interception of communications should only be issued by the Secretary in the Ministry of Home Affairs. However, it provided that in unavoidable circumstances an order could also be issued by an officer, not below the rank of a Joint Secretary to the Government of India, who has been authorised by the Union Home Secretary or the State Home Secretary.[15]

According to Rule 419A, the interception of any message or class of messages is to be carried out with the prior approval of the Head or the second senior most officer of the authorised security agency at the Central Level and at the State Level with the approval of officers authorised in this behalf not below the rank of Inspector General of Police, in the belowmentioned emergent cases:

in remote areas, where obtaining of prior directions for interception of messages or class of messages is not feasible; or
for operational reasons, where obtaining of prior directions for interception of message or class of messages is not feasible;

however, the concerned competent authority is required to be informed of such interceptions by the approving authority within three working days and such interceptions are to be confirmed by the competent authority within a period of seven working days. If the confirmation from the competent authority is not received within the stipulated seven days, such interception should cease and the same message or class of messages should not be intercepted thereafter without the prior approval of the Union Home Secretary or the State Home Secretary.[16]

Rule 419A also tries to incorporate certain safeguards to curb the risk of unrestricted surveillance by the law enforcement authorities which include the following:

Any order for interception issued by the competent authority should contain reasons for such direction and a copy of such an order should be forwarded to the Review Committee within a period of seven working days;[17]
Directions for interception should be issued only when it is not possible to acquire the information by any other reasonable means;[18]
The directed interception should include the interception of any message or class of messages that are sent to or from any person n or class of persons or relating to any particular subject whether such message or class of messages are received with one or more addresses, specified in the order being an address or addresses likely to be used for the transmission of communications from or to one particular person specified or described in the order or one particular set of premises specified or described in the order;[19]
The interception directions should specify the name and designation of the officer or the authority to whom the intercepted message or class of messages is to be disclosed to;[20]
The directions for interception would remain in force for sixty days, unless revoked earlier, and may be renewed but the same should not remain in force beyond a total period of one hundred and eighty days;[21]
The directions for interception should be conveyed to the designated officers of the licensee(s) in writing by an officer not below the rank of Superintendent of Police or Additional Superintendent of Police or the officer of the equivalent rank;[22]
The officer authorized to intercept any message or class of messages should maintain proper records mentioning therein, the intercepted message or class of messages, the particulars of persons whose message has been intercepted, the name and other particulars of the officer or the authority to whom the intercepted message or class of messages has been disclosed, etc.;[23]
All the requisitioning security agencies should designate one or more nodal officers not below the rank of Superintendent of Police or the officer of the equivalent rank to authenticate and send the requisitions for interception to the designated officers of the concerned service providers to be delivered by an officer not below the rank of Sub-Inspector of Police;[24]
Records pertaining to directions for interception and of intercepted messages should be destroyed by the competent authority and the authorized security and Law Enforcement Agencies every six months unless these are, or likely to be, required for functional requirements;[25]

According to Rule 419A, service providers \are required by law enforcement to intercept communications are required to comply with the following[26]:

Service providers should designate two senior executives of the company in every licensed service area/State/Union Territory as the nodal officers to receive and handle such requisitions for interception;[27]
The designated nodal officers of the service providers should issue acknowledgment letters to the concerned security and Law Enforcement Agency within two hours on receipt of intimations for interception;[28]
The system of designated nodal officers for communicating and receiving the requisitions for interceptions should also be followed in emergent cases/unavoidable cases where prior approval of the competent authority has not been obtained;[29]
The designated nodal officers of the service providers should forward every fifteen days a list of interception authorizations received by them during the preceding fortnight to the nodal officers of the security and Law Enforcement Agencies for confirmation of the authenticity of such authorizations;[30]
Service providers are required to put in place adequate and effective internal checks to ensure that unauthorized interception of messages does not take place, that extreme secrecy is maintained and that utmost care and precaution is taken with regards to the interception of messages;[31]

Service providers are held responsible for the actions of their employees. In the case of an established violation of license conditions pertaining to the maintenance of secrecy and confidentiality of information and unauthorized interception of communication, action shall be taken against service providers as per the provisions of the Indian Telegraph Act, and this shall not only include a fine, but also suspension or revocation of their license;[32]

Service providers should destroy records pertaining to directions for the interception of messages within two months of discontinuance of the interception of such messages and in doing so they should maintain extreme secrecy.[33]

Review Committee

Rule 419A of the Indian Telegraph Rules requires the establishment of a Review Committee by the Central Government and the State Government, as the case may be, for the interception of communications, as per the following conditions:[34]

(1) The Review Committee to be constituted by the Central Government shall consist of the following members, namely:

(a) Cabinet Secretary - Chairman

(b) Secretary to the Government of India in charge, Legal Affairs - Member

(2) The Review Committee to be constituted by a State Government shall consist of the following members, namely:

(a) Chief Secretary – Chairman

(b) Secretary Law/Legal Remembrancer in charge, Legal Affairs – Member

(3) The Review Committee meets at least once in two months and records its findings on whether the issued interception directions are in accordance with the provisions of sub-section (2) of Section 5 of the Indian Telegraph Act. When the Review Committee is of the opinion that the directions are not in accordance with the provisions referred to above it may set aside the directions and order for destruction of the copies of the intercepted message or class of messages;[35]

It must be noted that the Unlawful Activities (Prevention) Act, 1967, (which is currently used against most acts of urban terrorism) also allows for the interception of communications but the procedures and safeguards are supposed to be the same as under the Indian Telegraph Act and the Information Technology Act.[36]

3. Telecom Licenses

The telecom sector in India has seen immense activity in the last two decades ever since it was opened up to private competition. These last twenty years have seen a lot of turmoil and have offered a tremendous learning opportunity for the private players as well as the governmental bodies regulating the sector. Currently any entity wishing to get a telecom license is offered a UL (Unified License) which contains terms and conditions for all the services that a licensee may choose to offer. However there were a large number of other licenses before the current regime, and since the licenses have a long phase out, we have tried to cover what we believe are the four most important licenses issued to telecom operators starting with the CMTS License:

Cellular Mobile Telephony Services (CMTS) License

In terms of National Telecom Policy (NTP)-1994, the first phase of liberalization in mobile telephone service started with issue of 8 licenses for Cellular Mobile Telephony Services (CMTS) in the 4 metro cities of Delhi, Mumbai, Calcutta and Chennai to 8 private companies in November 1994. Subsequently, 34 licenses for 18 Territorial Telecom Circles were also issued to 14 private companies during 1995 to 1998. During this period a maximum of two licenses were granted for CMTS in each service area and these licensees were called 1st & 2nd cellular licensees.[37] Consequent upon announcement of guidelines for Unified Access (Basic & Cellular) Services licenses on 11.11.2003, some of the CMTS operators were permitted to migrate from CMTS License to Unified Access Service License (UASL) but currently no new CMTS and Basic service licenses are being awarded after issuing the guidelines for Unified Access Service Licence (UASL).

The important provisions regarding surveillance in the CMTS License are listed below:

Facilities for Interception: The CMTS License requires the Licensee to provide necessary facilities to the designated authorities for interception of the messages passing through its network.[38]

Monitoring of Telecom Traffic: The designated person of the Central/State Government as conveyed to the Licensor from time to time in addition to the Licensor or its nominee have the right to monitor the telecommunication traffic in every MSC or any other technically feasible point in the network set up by the licensee. The Licensee is required to make arrangement for monitoring simultaneous calls by Government security agencies. The hardware at licensee’s end and software required for monitoring of calls shall be engineered, provided/installed and maintained by the Licensee at licensee’s cost. In case the security agencies intend to locate the equipment at licensee’s premises for facilitating monitoring, the licensee is required to extend all support in this regard including space and entry of the authorised security personnel. The interface requirements as well as features and facilities as defined by the Licensor are to be implemented by the licensee for both data and speech. The Licensee is also required to ensure suitable redundancy in the complete chain of Monitoring equipment for trouble free operations of monitoring of at least 210 simultaneous calls.[39]

Monitoring Records to be maintained: Along with the monitored call following records are to be made available:

Called/calling party mobile/PSTN numbers.
Time/date and duration of interception.
Location of target subscribers. Cell ID should be provided for location of the target subscriber. However, Licensor may issue directions from time to time on the precision of location, based on technological developments and integration of Global Positioning System (GPS) which shall be binding on the LICENSEE.
Telephone numbers if any call-forwarding feature has been invoked by target subscriber.
Data records for even failed call attempts.
CDR (Call Data Record) of Roaming Subscriber.

The Licensee is required to provide the call data records of all the specified calls handled by the system at specified periodicity, as and when required by the security agencies.[40]

Protection of Privacy: It is the responsibility of the Licensee to ensure the protection of privacy of communication and ensure unathorised interception of messages does not take place.[41]

License Agreement for Provision of Internet Services (ISP License)

Internet services were launched in India on 15th August, 1995 by Videsh Sanchar Nigam Limited. In November, 1998, the Government opened up the sector for providing Internet services by private operators. The major provisions dealing with surveillance contained in the ISP License are given below:

Authorization for monitoring: Monitoring shall only be by the authorization of the Union Home Secretary or Home Secretaries of the States/Union Territories.[42]

Access to subscriber list by authorized intelligence agencies and licensor: The complete and up to date list of subscribers will be made available by the ISP on a password protected website – accessible to authorized intelligence agencies.[43] Information such as customer name, IP address, bandwidth provided, address of installation, data of installation, contact number and email of leased line customers shall be included in the website.[44] The licensor or its representatives will also have access to the Database relating to the subscribers of the ISP which is to be available at any instant.[45]

Right to monitor by the central/state government: The designated person of the central/state government or the licensor or nominee will have the right to monitor telecommunications traffic in every node or any other technically feasible point in the network. To facilitate this, the ISP must make arrangements for the monitoring of simultaneous calls by the Government or its security agencies.[46]

Right of DoT to monitor: DoT will have the ability to monitor customers who generate high traffic value and verify specified user identities on a monthly basis.[47]

Provision of mirror images: Mirror images of the remote access information should be made available online for monitoring purposes.[48] A safeguard provided for in the license is that remote access to networks is only allowed in areas approved by the DOT in consultation with the Security Agencies.[49]

Provision of information stored on dedicated transmission link: The ISP will provide the login password to DOT and authorized Government agencies on a monthly basis for access to information stored on any dedicated transmission link from ISP node to subscriber premises.[50]

Provision of subscriber identity and geographic location: The ISP must provide the traceable identity and geographic location of their subscribers, and if the subscriber is roaming – the ISP should try to find traceable identities of roaming subscribers from foreign companies.[51]

Facilities for monitoring: The ISP must provide the necessary facilities for continuous monitoring of the system as required by the licensor or its authorized representatives.[52]

Facilities for tracing: The ISP will also provide facilities for the tracing of nuisance, obnoxious or malicious calls, messages, or communications. These facilities are to be provided specifically to authorized officers of the Government of India (police, customs, excise, intelligence department) when the information is required for investigations or detection of crimes and in the interest of national security.[53]

Facilities and equipment to be specified by government: The types of interception equipment to be used will be specified by the government of India.[54] This includes the installation of necessary infrastructure in the service area with respect to Internet Telephony Services offered by the ISP including the processing, routing, directing, managing, authenticating the internet calls including the generation of Call Details Record, IP address, called numbers, date, duration, time, and charge of the internet telephony calls.[55]

Facilities for surveillance of mobile terminal activity: The ISP must also provide the government facilities to carry out surveillance of Mobile Terminal activity within a specified area whenever requested.[56]

Facilities for monitoring international gateway: As per the requirements of security agencies, every international gateway location having a capacity of 2 Mbps or more will be equipped will have a monitoring center capable of monitoring internet telephony traffic.[57]

Facilities for monitoring in the premise of the ISP: Every office must be at least 10x10 with adequate power, air conditioning, and accessible only to the monitoring agencies. One local exclusive telephone line must be provided, and a central monitoring center must be provided if the ISP has multiple nodal points.[58]

Protection of privacy: There is a responsibility on the ISP to protect the privacy of its communications transferred over its network. This includes securing the information and protecting against unauthorized interception, unauthorized disclosure, ensure the confidentiality of information, and protect against over disclosure of information- except when consent has been given.[59]

Log of users: Each ISP must maintain an up to date log of all users connected and the service that they are using (mail, telnet, http, etc). The ISPs must also log every outward login or telnet through their computers. These logs as well as copies of all the packets must be made available in real time to the Telecom Authority.[60]

Log of internet leased line customers: A record of each internet leased line customer should be kept along with details of connectivity, and reasons for taking the link should be kept and made readily available for inspection.[61]

Log of remote access activities: The ISP will also maintain a complete audit trail of the remote access activities that pertain to the network for at least six months. This information must be available on request for any agency authorized by the licensor.[62]

Monitoring requirements: The ISP must make arrangements for the monitoring of the telecommunication traffic in every MSC exchange or any other technically feasible point, of at least 210 calls simultaneously.[63]

Records to be made available:

CDRS: When required by security agencies, the ISP must make available records of i) called/calling party mobile/PSTN numbers ii) time/date and duration of calls iii) location of target subscribers and from time to time precise location iv) telephone numbers – and if any call forwarding feature has been evoked – records thereof v) data records for failed call attempts vi) CDR of roaming subscriber.[64]
Bulk connections: On a monthly basis, and from time to time, information with respect to bulk connections shall be forwarded to DoT, the licensor, and security agencies.[65]
Record of calls beyond specified threshold: Calls should be checked, analyzed, and a record maintained of all outgoing calls made by customers both during the day and night that exceed a set threshold of minutes. A list of suspected subscribers should be created by the ISP and should be informed to DoT and any officer authorized by the licensor at any point of time.[66]
Record of subscribers with calling line identification restrictions: Furthermore, a list of calling line identification restriction subscribers with their complete address and details should be created on a password protected website that is available to authorized government agencies.[67]

Unified Access Services (UAS) License

Unified Access Services operators provide services of collection, carriage, transmission and delivery of voice and/or non-voice messages within their area of operation, over the Licensee’s network by deploying circuit and/or packet switched equipment. They may also provide Voice Mail, Audiotex services, Video Conferencing, Videotex, E-Mail, Closed User Group (CUG) as Value Added Services over its network to the subscribers falling within its service area on a non-discriminatory basis.

The terms of providing the services are regulated under the Unified Access Service License (UASL) which also contains provisions regarding surveillance/interception. These provisions are regularly used by the state agencies to intercept telephonic and data traffic of subscribers. The relevant terms of the UASL dealing with surveillance and interception are discussed below:

Confidentiality of Information: The Licensee cannot employ bulk encryption equipment in its network. Any encryption equipment connected to the Licensee’s network for specific requirements has to have prior evaluation and approval of the Licensor or officer specially designated for the purpose. However, any encryption equipment connected to the Licensee’s network for specific requirements has to have prior evaluation and approval of the Licensor or officer specially designated for the purpose. However, the Licensee has the responsibility to ensure protection of privacy of communication and to ensure that unauthorised interception of messages does not take place.[68] The Licensee shall take necessary steps to ensure that the Licensee and any person(s) acting on its behalf observe confidentiality of customer information.[69]

Responsibility of the Licensee: The Licensee has to take all necessary steps to safeguard the privacy and confidentiality of any information about a third party and its business to whom it provides the service and from whom it has acquired such information by virtue of the service provided and shall use its best endeavors to secure that :

No person acting on behalf of the Licensee or the Licensee divulges or uses any such information except as may be necessary in the course of providing such service to the third party; and
No such person seeks such information other than is necessary for the purpose of providing service to the third party.[70]

Provision of monitoring facilities: Requisite monitoring facilities /equipment for each type of system used, shall be provided by the service provider at its own cost for monitoring as and when required by the licensor.[71] The license also requires the Licensee to provide necessary facilities to the designated authorities for interception of the messages passing through its network.[72] The licensor in this case is the President of India, as the head of the State, therefore all references to the term licensor can be assumed to be to the government of India (which usually acts through the department of telecom (DOT). For monitoring traffic, the licensee company has to provide access of their network and other facilities as well as to books of accounts to the security agencies.[73]

Monitoring by Designated Person: The designated person of the Central/ State Government as conveyed to the Licensor from time to time in addition to the Licensor or its nominee has the right to monitor the telecommunication traffic in every MSC/Exchange/MGC/MG or any other technically feasible point in the network set up by the Licensee. The Licensee is required to make arrangement for monitoring simultaneous calls by Government security agencies. The hardware at Licensee’s end and software required for monitoring of calls shall be engineered, provided/installed and maintained by the Licensee at Licensee’s cost. However, the respective Government instrumentality bears the cost of user end hardware and leased line circuits from the MSC/ Exchange/MGC/MG to the monitoring centres to be located as per their choice in their premises or in the premises of the Licensee. In case the security agencies intend to locate the equipment at Licensee’s premises for facilitating monitoring, the Licensee should extend all support in this regard including space and entry of the authorized security personnel. The Licensee is required to implement the interface requirements as well as features and facilities as defined by the Licensor for both data and speech. The Licensee is to ensure suitable redundancy in the complete chain of Monitoring equipment for trouble free operations of monitoring of at least 210 simultaneous calls for seven security agencies.[74]

Monitoring Records to be maintained: Along with the monitored call following records are to be made available:

Called/calling party mobile/PSTN numbers.
Time/date and duration of interception.
Location of target subscribers. Cell ID should be provided for location of the target subscriber. However, Licensor may issue directions from time to time on the precision of location, based on technological developments and integration of Global Positioning System (GPS) which shall be binding on the LICENSEE.
Telephone numbers if any call-forwarding feature has been invoked by target subscriber.
Data records for even failed call attempts.
CDR (Call Data Record) of Roaming Subscriber.

The Licensee is required to provide the call data records of all the specified calls handled by the system at specified periodicity, as and when required by the security agencies.[75]

List of Subscribers: The complete list of subscribers shall be made available by the Licensee on their website (having password controlled access), so that authorized Intelligence Agencies are able to obtain the subscriber list at any time, as per their convenience with the help of the password.[76] The Licensor or its representative(s) have an access to the Database relating to the subscribers of the Licensee. The Licensee shall also update the list of his subscribers and make available the same to the Licensor at regular intervals. The Licensee shall make available, at any prescribed instant, to the Licensor or its authorized representative details of the subscribers using the service.[77] The Licensee must provide traceable identity of their subscribers,[78] and should be able to provide the geographical location (BTS location) of any subscriber at a given point of time, upon request by the Licensor or any other agency authorized by it.[79]

CDRs for Large Number of Outgoing Calls: The call detail records for outgoing calls made by subscribers making large number of outgoing calls day and night and to the various telephone numbers should be analyzed. Normally, no incoming call is observed in such cases. This can be done by running special programs for this purpose.[80] Although this provision itself does not say that it is limited to bulk subscribers (subscribers with more than 10 lines), it is contained as a sub-clause of section 41.19 which talks about specific measures for bulk subscribers, therefore it is possible that this provision is limited only to bulk subscribers and not to all subscribers.

No Remote Access to Suppliers: Suppliers/manufacturers and affiliate(s) are not allowed any remote access to the be enabled to access Lawful Interception System(LIS), Lawful Interception Monitoring(LIM), Call contents of the traffic and any such sensitive sector/data, which the licensor may notify from time to time, under any circumstances.[81] The Licensee is also not allowed to use remote access facility for monitoring of content.[82] Further, suitable technical device is required to be made available at Indian end to the designated security agency/licensor in which a mirror image of the remote access information is available on line for monitoring purposes.[83]

Monitoring as per the Rules under Telegraph Act: In order to maintain the privacy of voice and data, monitoring shall be in accordance with rules in this regard under Indian Telegraph Act, 1885.[84] It interesting to note that the monitoring under the UASL license is required to be as per the Rules prescribed under the Telegraph Act, but no mention is made of the Rules under the Information Technology Act.

Monitoring from Centralised Location: The Licensee has to ensure that necessary provision (hardware/ software) is available in its equipment for doing lawful interception and monitoring from a centralized location.[85]

Unified License (UL)

The National Telecom Policy - 2012 recognized the fact that the evolution from analog to digital technology has facilitated the conversion of voice, data and video to the digital form which are increasingly being rendered through single networks bringing about a convergence in networks, services and devices. It was therefore felt imperative to move towards convergence between various services, networks, platforms, technologies and overcome the incumbent segregation of licensing, registration and regulatory mechanisms in these areas. It was for this reason that the Government of India decided to move to the Unified License regime under which service providers could opt for all or any one or more of a number of different services.[86]

Provision of interception facilities by Licensee: The UL requires that the requisite monitoring/ interception facilities /equipment for each type of service, should be provided by the Licensee at its own cost for monitoring as per the requirement specified by the Licensor from time to time.[87] The Licensee is required to provide necessary facilities to the designated authorities of Central/State Government as conveyed by the Licensor from time to time for interception of the messages passing through its network, as per the provisions of the Indian Telegraph Act.[88]

Bulk encryption and unauthorized interception: The UL prohibits the Licensee from employing bulk encryption equipment in its network. Licensor or officers specially designated for the purpose are allowed to evaluate any encryption equipment connected to the Licensee’s network. However, it is the responsibility of the Licensee to ensure protection of privacy of communication and to ensure that unauthorized interception of messages does not take place.[89] The use of encryption by the subscriber shall be governed by the Government Policy/rules made under the Information Technology Act, 2000.[90]

Safeguarding of Privacy and Confidentiality: The Licensee shall take necessary steps to ensure that the Licensee and any person(s) acting on its behalf observe confidentiality of customer information.[91] Subject to terms and conditions of the license, the Licensee is required to take all necessary steps to safeguard the privacy and confidentiality of any information about a third party and its business to whom it provides services and from whom it has acquired such information by virtue of the service provided and shall use its best endeavors to secure that: a) No person acting on behalf of the Licensee or the Licensee divulges or uses any such information except as may be necessary in the course of providing such service; and b) No such person seeks such information other than is necessary for the purpose of providing service to the third party.

Provided the above para does not apply where: a) The information relates to a specific party and that party has consented in writing to such information being divulged or used, and such information is divulged or used in accordance with the terms of that consent; or b) The information is already open to the public and otherwise known.[92]

No Remote Access to Suppliers: Suppliers/manufacturers and affiliate(s) are not allowed any remote access to the be enabled to access Lawful Interception System(LIS), Lawful Interception Monitoring(LIM), Call contents of the traffic and any such sensitive sector/data, which the licensor may notify from time to time, under any circumstances.[93] The Licensee is also not allowed to use remote access facility for monitoring of content.[94] Further, suitable technical device is required to be made available at Indian end to the designated security agency/licensor in which a mirror image of the remote access information is available on line for monitoring purposes.[95]

Monitoring as per the Rules under Telegraph Act: In order to maintain the privacy of voice and data, monitoring shall be in accordance with rules in this regard under Indian Telegraph Act, 1885.[96] Just as in the UASL, the monitoring under the UL license is required to be as per the Rules prescribed under the Telegraph Act, but no mention is made of the Rules under the Information Technology Act.

Terms specific to various services

Since the UL License intends to cover all services under a single license, in addition to the general terms and conditions for interception, it also has terms for each specific service. We shall now discuss the terms for interception specific to each service offered under the Unified License.

Access Service: The designated person of the Central/ State Government, in addition to the Licensor or its nominee, shall have the right to monitor the telecommunication traffic in every MSC/ Exchange/ MGC/ MG/ Routers or any other technically feasible point in the network set up by the Licensee. The Licensee is required to make arrangement for monitoring simultaneous calls by Government security agencies. For establishing connectivity to Centralized Monitoring System, the Licensee at its own cost shall provide appropriately dimensioned hardware and bandwidth/dark fibre upto a designated point as required by Licensor from time to time. In case the security agencies intend to locate the equipment at Licensee’s premises for facilitating monitoring, the Licensee should extend all support in this regard including space and entry of the authorized security personnel.

The Interface requirements as well as features and facilities as defined by the Licensor should be implemented by the Licensee for both data and speech. The Licensee should ensure suitable redundancy in the complete chain of Lawful Interception and Monitoring equipment for trouble free operations of monitoring of at least 480 simultaneous calls as per requirement with at least 30 simultaneous calls for each of the designated security/ law enforcement agencies. Each MSC of the Licensee in the service area shall have the capacity for provisioning of at least 3000 numbers for monitoring. Presently there are ten (10) designated security/ law enforcement agencies. The above capacity provisions and no. of designated security/ law enforcement agencies may be amended by the Licensor separately by issuing instructions at any time.

Along with the monitored call following records are to be made available:

Called/calling party mobile/PSTN numbers.
Time/date and duration of interception.
Location of target subscribers. Cell ID should be provided for location of the target subscriber. However, Licensor may issue directions from time to time on the precision of location, based on technological developments and integration of Global Positioning System (GPS) which shall be binding on the LICENSEE.
Telephone numbers if any call-forwarding feature has been invoked by target subscriber.
Data records for even failed call attempts.
CDR (Call Data Record) of Roaming Subscriber.

The Licensee is required to provide the call data records of all the specified calls handled by the system at specified periodicity, as and when required by the security agencies.[97]

The call detail records for outgoing calls made by those subscribers making large number of outgoing calls day and night to the various telephone numbers with normally no incoming calls, is required to be analyzed by the Licensee. The service provider is required to run special programme, devise appropriate fraud management and prevention programme and fix threshold levels of average per day usage in minutes of the telephone connection; all telephone connections crossing the threshold of usage are required to be checked for bona fide use. A record of check must be maintained which may be verified by Licensor any time. The list/details of suspected subscribers should be informed to the respective TERM Cell of DoT and any other officer authorized by Licensor from time to time.[98]

The Licensee shall provide location details of mobile customers as per the accuracy and time frame mentioned in the Unified License. It shall be a part of CDR in the form of longitude and latitude, besides the co-ordinate of the BTS, which is already one of the mandated fields of CDR. To start with, these details will be provided for specified mobile numbers. However, within a period of 3 years from effective date of the Unified License, location details shall be part of CDR for all mobile calls.[99]

Internet Service: The Licensee is required to maintain CDR/IPDR for Internet including Internet Telephony Service for a minimum period of one year. The Licensee is also required to maintain log-in/log-out details of all subscribers for services provided such as internet access, e-mail, Internet Telephony, IPTV etc. These logs are to be maintained for a minimum period of one year. For the purpose of interception and monitoring of traffic, the copies of all the packets originating from / terminating into the Customer Premises Equipment (CPE) shall be made available to the Licensor/Security Agencies. Further, the list of Internet Lease Line (ILL) customers is to be placed on a password protected website in the format prescribed in the Unified License.[100]

Lawful Interception and Monitoring (LIM) systems of requisite capacities are to be set up by the Licensees for Internet traffic including Internet telephony traffic through their Internet gateways and /or Internet nodes at their own cost, as per the requirement of the security agencies/Licensor prescribed from time to time. The cost of maintenance of the monitoring equipment and infrastructure at the monitoring centre located at the premises of the licensee shall be borne by the Licensee. In case the Licensee obtains Access spectrum for providing Internet Service / Broadband Wireless Access using the Access Spectrum, the Licensee shall install the required Lawful Interception and Monitoring systems of requisite capacities prior to commencement of service. The Licensee, while providing downstream Internet bandwidth to an Internet Service provider is also required to ensure that all the traffic of downstream ISP passing through the Licensee’s network can be monitored in the network of the Licensee. However, for nodes of Licensee having upstream bandwidth from multiple service providers, the Licensee may be mandated to install LIM/LIS at these nodes, as per the requirement of security agencies. In such cases, upstream service providers may not be required to monitor this bandwidth.[101]

In case the Licensee has multiple nodes/points of presence and has capability to monitor the traffic in all the Routers/switches from a central location, the Licensor may accept to monitor the traffic from the said central monitoring location, provided that the Licensee is able to demonstrate to the Licensor/Security Agencies that all routers / switches are accessible from the central monitoring location. Moreover, the Licensee would have to inform the Licensor of every change that takes place in their topology /configuration, and ensure that such change does not make any routers/switches inaccessible from the central monitoring location. Further, Office space of 10 feet x 10 feet with adequate and uninterrupted power supply and air-conditioning which is physically secured and accessible only to the monitoring agencies shall be provided by the Licensee at each Internet Gateway location at its cost.[102]

National Long Distance (NLD) Service: The requisite monitoring facilities are required to be provided by the Licensee as per requirement of Licensor. The details of leased circuit provided by the Licensee is to be provided monthly to security agencies & DDG (TERM) of the Licensed Service Area where the licensee has its registered office.[103]

International Long Distance (ILD) Service: Office space of 20’x20’ with adequate and uninterrupted power supply and air-conditioning which is physically secured and accessible only to the personnel authorized by the Licensor is required to be provided by the Licensee at each Gateway location free of cost.[104] The cost of monitoring equipment is to be borne by the Licensee. The installation of the monitoring equipment at the ILD Gateway Station is to be done by the Licensee. After installation of the monitoring equipment, the Licensee shall get the same inspected by monitoring /security agencies. The permission to operate/commission the gateway will be given only after this.[105]

The designated person of the Central/ State Government, in addition to the Licensor or its nominee, has the right to monitor the telecommunication traffic in every ILD Gateway / Routers or any other technically feasible point in the network set up by the Licensee. The Licensee is required to make arrangement for monitoring simultaneous calls by Government security agencies. For establishing connectivity to Centralized Monitoring System, the Licensee, at its own cost, is required to provide appropriately dimensioned hardware and bandwidth/dark fibre upto a designated point as required by Licensor from time to time. In case the security agencies intend to locate the equipment at Licensee’s premises for facilitating monitoring, the Licensee should extend all support in this regard including Space and Entry of the authorized security personnel. The Interface requirements as well as features and facilities as defined by the Licensor should be implemented by the Licensee for both data and speech. The Licensee should ensure suitable redundancy in the complete chain of Monitoring equipment for trouble free operations of monitoring of at least 480 simultaneous calls as per requirement with at least 30 simultaneous calls for each of the designated security/ law enforcement agencies. Each ILD Gateway of the Licensee shall have the capacity for provisioning of at least 5000 numbers for monitoring. Presently there are ten (10) designated security/ law enforcement agencies. The above capacity provisions and number of designated security/ law enforcement agencies may be amended by the Licensor separately by issuing instructions at any time.[106]

The Licensee is required to provide the call data records of all the specified calls handled by the system at specified periodicity, as and when required by the security agencies in the format prescribed from time to time.[107]

Global Mobile Personal Communication by Satellite (GMPCS) Service: The designated Authority of the Central/State Government shall have the right to monitor the telecommunication traffic in every Gateway set up in India. The Licensee shall make arrangement for monitoring of calls as specified in the Unified License.[108]

The hardware/software required for monitoring of calls shall be engineered, provided/installed and maintained by the Licensee at the ICC (Intercept Control Centre) to be established at the GMPCS Gateway(s) as also in the premises of security agencies at Licensee’s cost. The Interface requirements as well as features and facilities shall be worked out and implemented by the Licensee for both data and speech. The Licensee should ensure suitable redundancy in the complete chain of Monitoring equipment for trouble free operations. The Licensee shall provide suitable training to the designated representatives of the Licensor regarding operation and maintenance of Monitoring equipment (ICC & MC). Interception of target subscribers using messaging services should also be provided even if retrieval is carried out using PSTN links. For establishing connectivity to Centralized Monitoring System, the Licensee at its own cost shall provide appropriately dimensioned hardware and bandwidth/dark fibre upto a designated point as required by Licensor from time to time.[109] The License also has specific obligations to extend monitored calls to designated security agencies as provided in the UL.[110] Further, the Licensee is required to provide the call data records of all the calls handled by the system at specified periodicity, if and as and when required by the security agencies.[111] It is the responsibility of the service provider for Global Mobile Personal Communication by Satellite (GMPCS) to provide facility to carry out surveillance of User Terminal activity.[112]

The Licensee has to make available adequate monitoring facility at the GMPCS Gateway in India to monitor all traffic (traffic originating/terminating in India) passing through the applicable system. For this purpose, the Licensee shall set up at his cost, the requisite interfaces, as well as features and facilities for monitoring of calls by designated agencies as directed by the Licensor from time to time. In addition to the Target Intercept List (TIL), it should also be possible to carry out specific geographic location based interception, if so desired by the designated security agencies. Monitoring of calls should not be perceptible to mobile users either during direct monitoring or when call has been grounded for monitoring. The Licensee shall not prefer any charges for grounding a call for monitoring purposes. The intercepted data is to be pushed to designated Security Agencies’ server on fire and forget basis. No records shall be maintained by the Licensee regarding monitoring activities and air-time used beyond prescribed time limit.

The Licensee has to ensure that any User Terminal (UT) registered in the gateway of another country shall re-register with Indian Gateway when operating from Indian Territory. Any UT registered outside India, when attempting to make/receive calls from within India, without due authority, shall be automatically denied service by the system and occurrence of such attempts along with information about UT identity as well as location shall be reported to the designated authority immediately.

The Licensee is required to have provision to scan operation of subscribers specified by security/ law enforcement agencies through certain sensitive areas within the Indian territory and shall provide their identity and positional location (latitude and longitude) to Licensor on as and when required basis.

Public Mobile Radio Trunking Service (PMRTS): Suitable monitoring equipment prescribed by the Licensor for each type of System used has to be provided by the Licensee at his own cost for monitoring, as and when required.[113]

Very Small Aperture Terminal (VSAT) Closed User Group (CUG) Service: Requisite monitoring facilities/ equipment for each type of system used have to be provided by the Licensee at its own cost for monitoring as and when required by the Licensor.[114] The Licensee shall provide at its own cost technical facilities for accessing any port of the switching equipment at the HUB for interception of the messages by the designated authorities at a location to be determined by the Licensor.[115]

Surveillance of MSS-R Service: The Licensee has to provide at its own cost technical facilities for accessing any port of the switching equipment at the HUB for interception of the messages by the designated authorities at a location as and when required.[116] It is the responsibility of the service provider of INSAT- Mobile Satellite System Reporting (MSS-R) service to provide facility to carry out surveillance of User Terminal activity within a specified area.[117]

Resale of International Private Leased Circuit (IPLC) Service: The Licensee has to take IPLC from the licensed ILDOs. The interception and monitoring of Resellers circuits will take place at the Gateway of the ILDO from whom the IPLC has been taken by the Licensee. The provisioning for Lawful Interception & Monitoring of the Resellers’ IPLC shall be done by the ILD Operator and the concerned ILDO shall be responsible for Lawful Interception and Monitoring of the traffic passing through the IPLC. The Resellers shall extend all cooperation in respect of interception and monitoring of its IPLC and shall be responsible for the interception results. The Licensee shall be responsible to interact, correspond and liaise with the licensor and security agencies with regard to security monitoring of the traffic. The Licensee shall, before providing an IPLC to the customer, get the details of services/equipment to be connected on both ends of IPLC, including type of terminals, data rate, actual use of circuit, protocols/interface to be used etc. The Resellers shall permit only such type of service/protocol on the IPLC for which the concerned ILDO has capability of interception and monitoring. The Licensee has to pass on any direct request placed by security agencies on him for interception of the traffic on their IPLC to the concerned ILDOs within two hours for necessary actions.[118]

4. The Information Technology Act, 2000

The Information Technology Act, 2000, was amended in a major way in 2008 and is the primary legislation which regulates the interception, monitoring, decryption and collection of traffic information of digital communications in India.

More specifically, section 69 of the Information Technology Act empowers the central Government and the state governments to issue directions for the monitoring, interception or decryption of any information transmitted, received or stored through a computer resource. Section 69 of the Information Technology Act, 2000 expands the grounds upon which interception can take place as compared to the Indian Telegraph Act, 1885. As such, the interception of communications under Section 69 is carried out in the interest of[119]:

The sovereignty or integrity of India

Defence of India

Security of the State
Friendly relations with foreign States
Public order
Preventing incitement to the commission of any cognizable offense relating to the above
For the investigation of any offense

While the grounds for interception are similar to the Indian Telegraph Act (except for the condition of prevention of incitement of only cognizable offences and the addition of investigation of any offence) the Information Technology Act does not have the overarching condition that interception can only occur in the case of public emergency or in the interest of public safety.

Additionally, section 69 of the Act mandates that any person or intermediary who fails to assist the specified agency with the interception, monitoring, decryption or provision of information stored in a computer resource shall be punished with imprisonment for a term which may extend to seven years and shall be liable for a fine.[120]

Section 69B of the Information Technology Act empowers the Central Government to authorise the monitoring and collection of information and traffic data generated, transmitted, received or stored through any computer resource for the purpose of cyber security. According to this section, any intermediary who intentionally or knowingly fails to provide technical assistance to the authorised agency which is required to monitor and collection information and traffic data shall be punished with an imprisonment which may extend to three years and will also be liable to a fine.[121]

The main difference between Section 69 and Section 69B is that the first requires the interception, monitoring and decryption of all information generated, transmitted, received or stored through a computer resource when it is deemed “necessary or expedient” to do so, whereas Section 69B specifically provides a mechanism for all metadata of all communications through a computer resource for the purpose of combating threats to “cyber security”. Directions under Section 69 can be issued by the Secretary to the Ministry of Home Affairs, whereas directions under Section 69B can only be issued by the Secretary of the Department of Information Technology under the Union Ministry of Communications and Information Technology.

Overlap with the Telegraph Act

Thus while the Telegraph Act only allows for interception of messages or class of messages transmitted by a telegraph, the Information Technology Act enables interception of any information being transmitted or stored in a computer resource. Since a “computer resource” is defined to include a communication device (such as cellphones and PDAs) there is a overlap between the provisions of the Information Technology Act and the Telegraph Act concerning the provisions of interception of information sent through mobile phones. This is further complicated by the fact that the UAS License specifically states that it is governed by the provisions of the Indian Telegraph Act, the Indian Wireless Telegraphy Act and the Telecom Regulatory Authority of India Act, but does not mention the Information Technology Act.[122] This does not mean that the Licensees under the Telecom Licenses are not bound by any other laws of India (including the Information Technology Act) but it is just an invitation to unnecessary complexities and confusions with regard to a very serious issue such as interception. This situation has thankfully been remedied by the Unified License (UL) which, although issued under section of 4 of the Telegraph Act, also references the Information Technology Act thus providing essential clarity with respect to the applicability of the Information Technology Act to the License Agreement.

Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009

The interception of internet communications is mainly covered by the Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009under the Information Technology Act (the “IT Interception Rules”). In particular, the rules framed under Section 69 and 69B include safeguards stipulating to who may issue directions of interception and monitoring, how such directions are to be executed, the duration they remain in operation, to whom data may be disclosed, confidentiality obligations of intermediaries, periodic oversight of interception directions by a Review Committee under the Indian Telegraph Act, the retention of records of interception by intermediaries and to the mandatory destruction of information in appropriate cases.

According to the IT Interception Rules, only the competent authority can issue an order for the interception, monitoring or decryption of any information generated, transmitted, received or stored in any computer resource under sub-section (2) of section 69 of the Information Technology Act.[123] At the State and Union Territory level, the State Secretaries respectively in charge of the Home Departments are designated as “competent authorities” to issue interception directions.[124]In unavoidable circumstances the Joint Secretary to the Government of India, when so authorised by the Competent Authority, may issue an order. Interception may also be carried out with the prior approval of the Head or the second senior most officer of the authorised security agency at the Central Level and at the State Level with the approval of officers authorised in this behalf not below the rank of Inspector General of Police, in the belowmentioned emergent cases:

(1) in remote areas, where obtaining of prior directions for interception or monitoring or decryption of information is not feasible; or

(2) for operational reasons, where obtaining of prior directions for interception or monitoring or decryption of any information generation, transmitted, received or stored in any computer resource is not feasible,

however, in the above circumstances the officer would have to inform the competent authority in writing within three working days about the emergency and of the interception, monitoring or decryption and obtain the approval of the competent authority within a period of seven working days. If the approval of the competent authority is not obtained within the said period of seven working days, such interception or monitoring or decryption shall cease and the information shall not be intercepted or monitored or decrypted thereafter without the prior approval of the competent authority.[125] If a state wishes to intercept information that is beyond its jurisdiction, it must request permission to issue the direction from the Secretary in the Ministry of Home Affairs.[126]

In order to avoid the risk of unauthorised interception, the IT Interception Rules provide for the following safeguards:

If authorised by the competent authority, any agency of the government may intercept, monitor, or decrypt information transmitted, received, or stored in any computer resource only for the purposes specified in section 69(1) of the IT Act.[127]
The IT Interception Rules further provide that the competent authority may give any decryption direction to the decryption key holder.[128]
The officer issuing an order for interception is required to issue requests in writing to designated nodal officers of the service provider.[129]
Any direction issued by the competent authority must contain the reasons for direction, and must be forwarded to the review committee seven days after being issued.[130]
In the case of issuing or approving an interception order, in arriving at its decision the competent authority must consider all alternate means of acquiring the information.[131]
The order must relate to information sent or likely to be sent from one or more particular computer resources to another (or many) computer resources.[132]
The reasons for ordering interceptions must be recorded in writing, and must specify the name and designation of the officer to whom the information obtained is to be disclosed, and also specify the uses to which the information is to be put.[133]
The directions for interception will remain in force for a period of 60 days, unless renewed. If the orders are renewed they cannot be in force for longer than 180 days.[134]
Authorized agencies are prohibited from using or disclosing contents of intercepted communications for any purpose other than investigation, but they are permitted to share the contents with other security agencies for the purpose of investigation or in judicial proceedings. Furthermore, security agencies at the union territory and state level will share any information obtained by following interception orders with any security agency at the centre.[135]
All records, including electronic records pertaining to interception are to be destroyed by the government agency “every six months, except in cases where such information is required or likely to be required for functional purposes”.[136]
The contents of intercepted, monitored, or decrypted information will not be used or disclosed by any agency, competent authority, or nodal officer for any purpose other than its intended purpose.[137]
The agency authorised by the Secretary of Home Affairs is required to appoint a nodal officer (not below the rank of superintendent of police or equivalent) to authenticate and send directions to service providers or decryption key holders.[138]

The IT Interception Rules also place the following obligations on the service providers:

In addition, all records pertaining to directions for interception and monitoring are to be destroyed by the service provider within a period of two months following discontinuance of interception or monitoring, unless they are required for any ongoing investigation or legal proceedings.[139]
Upon receiving an order for interception, service providers are required to provide all facilities, co-operation, and assistance for interception, monitoring, and decryption. This includes assisting with: the installation of the authorised agency's equipment, the maintenance, testing, or use of such equipment, the removal of such equipment, and any action required for accessing stored information under the direction.[140]
Additionally, decryption key holders are required to disclose the decryption key and provide assistance in decrypting information for authorized agencies.[141]

Every fifteen days the officers designated by the intermediaries are required to forward to the nodal officer in charge a list of interceptions orders received by them. The list must include the details such as reference and date of orders of the competent authority.[142]
The service provider is required to put in place adequate internal checks to ensure that unauthorised interception does not take place, and to ensure the extreme secrecy of intercepted information is maintained.[143]
The contents of intercepted communications are not allowed to be disclosed or used by any person other than the intended recipient.[144]
Additionally, the service provider is required to put in place internal checks to ensure that unauthorized interception of information does not take place and extreme secrecy is maintained. This includes ensuring that the interception and related information are handled only by the designated officers of the service provider.[145]

Information Technology (Procedure and Safeguards for Monitoring and Collecting Traffic Data or Information) Rules, 2009

The Information Technology (Procedure and Safeguards for Monitoring and Collecting Traffic Data or Information) Rules, 2009, under section 69B of the Information Technology Act, stipulate that directions for the monitoring and collection of traffic data or information can be issued by an order made by the competent authority[146] for any or all of the following purposes related to cyber security:

forecasting of imminent cyber incidents;
monitoring network application with traffic data or information on computer resource;
identification and determination of viruses or computer contaminant;
tracking cyber security breaches or cyber security incidents;
tracking computer resource breaching cyber security or spreading virus or computer contaminants;
identifying or tracking any person who has breached, or is suspected of having breached or likely to breach cyber security;
undertaking forensic of the concerned computer resource as a part of investigation or internal audit of information security practices in the computer resources;
accessing stored information for enforcement of any provisions of the laws relating to cyber security for the time being in force;
any other matter relating to cyber security.[147]

According to these Rules, any direction issued by the competent authority should contain reasons for such direction and a copy of such direction should be forwarded to the Review Committee within a period of seven working days.[148] Furthermore, these Rules state that the Review Committee shall meet at least once in two months and record its finding on whether the issued directions are in accordance with the provisions of sub-section (3) of section 69B of the Act. If the Review Committee is of the opinion that the directions are not in accordance with the provisions referred to above, it may set aside the directions and issue an order for the destruction of the copies, including corresponding electronic record of the monitored or collected traffic data or information.[149]

Information Technology (Guidelines for Cyber Cafes) Rules, 2011

The Information Technology (Guidelines for Cyber Cafes) Rules, 2011, were issued under powers granted under section 87(2), read with section 79(2) of the Information Technology Act, 2000.[150] These rules require cyber cafes in India to store and maintain backup logs for each login by any user, to retain such records for a year and to ensure that the log is not tampered. Rule 7 requires the inspection of cyber cafes to determine that the information provided during registration is accurate and remains updated.

5. The Indian Post Office Act, 1898
Section 26 of the Indian Post Office Act, 1898, empowers the Central Government and the State Governments to intercept postal articles.[151] In particular, section 26 of the Indian Post Office Act, 1898, states that on the occurrence of any public emergency or in the interest of public safety or tranquility, the Central Government, State Government or any officer specially authorised by the Central or State Government may direct the interception, detention or disposal of any postal article, class or description of postal articles in the course of transmission by post. Furthermore, section 26 states that if any doubt arises regarding the existence of public emergency, public safety or tranquility then a certificate to that effect by the Central Government or a State Government would be considered as conclusive proof of such condition being satisfied.

According to this section, the Central Government and the State Governments of India can intercept postal articles if it is deemed to be in the instance of a 'public emergency' or for 'public safety or tranquility'. However, the Indian Post Office Act, 1898, does not cover electronic communications and does not mandate their interception, which is covered by the Information Technology Act, 2000 and the Indian Telegraph Act, 1885.

6. The Indian Wireless Telegraphy Act, 1933
The Indian Wireless Telegraphy Act was passed to regulate and govern the possession of wireless telegraphy equipment within the territory of India. This Act essentially provides that no person can own “wireless telegraphy apparatus”[152] except with a license provided under this Act and must use the equipment in accordance with the terms provided in the license.[153]

One of the major sources of revenue for the Indian State Broadcasting Service was revenue from the licence fee from working of wireless apparatus under the Indian Telegraph Act, 1885.The Indian State Broadcasting Service was losing revenue due to lack of legislation for prosecuting persons using unlicensed wireless apparatus as it was difficult to trace them at the first place and then prove that such instrument has been installed, worked and maintained without licence. Therefore, the current legislation was proposed, in order to prohibit possession of wireless telegraphy apparatus without licence.

Presently the Act is used to prosecute cases, related to illegal possession and transmission via satellite phones. Any person who wishes to use satellite phones for communication purposes has to get licence from the Department of Telecommunications.[154]

7. The Code of Criminal Procedure
Section 91 of the Code of Criminal Procedure regulates targeted surveillance. In particular, section 91 states that a Court in India or any officer in charge of a police station may summon a person to produce any document or any other thing that is necessary for the purposes of any investigation, inquiry, trial or other proceeding under the Code of Criminal Procedure.[155] Under section 91, law enforcement agencies in India could theoretically access stored data. Additionally, section 92 of the Code of Criminal Procedure regulates the interception of a document, parcel or thing in the possession of a postal or telegraph authority.

Further section 356(1) of the Code of Criminal Procedure provides that in certain cases the Courts have the power to direct repeat offenders convicted under certain provisions, to notify his residence and any change of, or absence from, such residence after release for a term not exceeding five years from the date of the expiration of the second sentence.

Policy Suggestions

In order to avoid the different standards being adopted for different aspects of surveillance and in different parts of the country, there should be one single policy document or surveillance and interception manual which should contain the rules and regulations regarding all kinds of surveillance. This would not only help in identifying problems in the law but may also be useful in streamlining the entire surveillance regime. However it is easier said than done and requires a mammoth effort at the legislative stage. This is because under the Constitutional scheme of India law and order is a State subject and the police machinery in every State is under the authority of the State government. Therefore it would not be possible to issue a single legislation dealing with all aspects of surveillance since the States are independent in their powers to deal with the police machinery.

Even when we look at the issue of interception, certain state legislations especially the ones dealing with organized crime and bootleggers such as the Maharashtra Control of Organized Crime Act, 1999, the Andhra Pradesh Control of Organized Crime Act, 2001, also deal with the issue of interception and contain provisions empowering the state government to intercept communications for the purpose of using it to investigate or prevent criminal activities. Further even the two central level legislations that deal with interception, viz. the Telegraph Act and the Information Technology Act, specifically empower the State governments also to intercept communications on the same grounds as the Central Government. Since interception of communications is mostly undertaken by security and law enforcement agencies, broadly for the maintenance of law and order, State governments cannot be prevented from issuing their own legislations to deal with interception.

Due to the abovementioned legal and constitutional complexities the major problem in achieving harmonization is to get both the Central and State governments on to the same page. Even if the Central government amends the Telegraph Act and the IT Act to bring them in line with each other, the State governments will still be free to do whatever they please. Therefore it seems the best approach in order to achieve harmonization may be to have a two pronged strategy, i.e. (i) issue a National Surveillance Policy covering both interception and general surveillance; and (ii) amend the central legislations i.e. the Telegraph Act and the Information Technology Act in accordance with the National Surveillance Policy. Once a National Surveillance Policy, based on scientific data and the latest theories on criminology is issued, it is hoped that State governments will themselves like to adopt the principles enshrined therein and amend their own legislations dealing with interception to fall in line with the National Surveillance Policy.

[1] Section 6(2)(b) of the Model Police Manual.

[2] Section 191 (D) of the Model Police Manual.

[3] Section 200 (D) of the Model Police Manual.

[4] Section 2011 (I) of the Model Police Manual.

[5] Section 201 (II) of the Model Police Manual.

[6] Section 201 (IV) of the Model Police Manual.

[7] Section 193 (III) of the Model Police Manual.

[8] Surjan Das & Basudeb Chattopadhyay, Rural Crime in Police Perception: A Study of Village Crime Note Books, 26(3) Economic and Political Weekly 129, 129 (1991).

[9] Section 201 (III) of the Model Police Manual.

[10] Section 201 (V) of the Model Police Manual.

[11] Section 201 (VII) of the Model Police Manual.

[12] Section 356(1) of the Criminal Procedure Code states as follows:

356. Order for notifying address of previously convicted offender.

(1) When any person, having been convicted by a Court in India of an offence punishable under section 215, section 489A, section 489B, section 489C or section 489D of the Indian Penal Code, (45 of 1860 ) or of any offence punishable under Chapter XII or Chapter XVII of that Code, with imprisonment for a term of three years or upwards, is again convicted of any offence punishable under any of those sections or Chapters with imprisonment for a term of three years or upwards by any Court other than that of a Magistrate of the second class, such Court may, if it thinks fit, at the time of passing a sentence of imprisonment on such person, also order that his residence and any change of, or absence from, such residence after release be notified as hereinafter provided for a term not exceeding five years from the date of the expiration of such sentence.

[13] The Indian Telegraph Act, 1885, http://www.ijlt.in/pdffiles/Indian-Telegraph-Act-1885.pdf

[14] Privacy International, Report: “India”, Chapter 3: “Surveillance Policies”, https://www.privacyinternational.org/reports/india/iii-surveillance-policies

[15] Rule 419A(1), Indian Telegraph Rules, 1951.

[16] Rule 419A(1), Indian Telegraph Rules, 1951.

[17] Rule 419A(2), Indian Telegraph Rules, 1951.

[18] Rule 419A(3), Indian Telegraph Rules, 1951.

[19] Rule 419A(4), Indian Telegraph Rules, 1951.

[20] Rule 419A(5), Indian Telegraph Rules, 1951.

[21] Rule 419A(6), Indian Telegraph Rules, 1951.

[22] Rule 419A(7), Indian Telegraph Rules, 1951.

[23] Rule 419A(8), Indian Telegraph Rules, 1951.

[24] Rule 419A(9), Indian Telegraph Rules, 1951.

[25] Rule 419A(18), Indian Telegraph Rules, 1951.

[26] Ibid.

[27] Rule 419A(10), Indian Telegraph Rules, 1951.

[28] Rule 419A(11), Indian Telegraph Rules, 1951.

[29] Rule 419A(12), Indian Telegraph Rules, 1951.

[30] Rule 419A(13), Indian Telegraph Rules, 1951.

[31] Rule 419A(14), Indian Telegraph Rules, 1951.

[32] Rule 419A(15), Indian Telegraph Rules, 1951.

[33] Rule 419A(19), Indian Telegraph Rules, 1951.

[34] Ibid.

[35] Ibid.

[36] Section 46 of the Unlawful Activities Prevention Act, 1967. The Unlawful Activities (Prevention) Act, 1967 has certain additional safeguards such as not allowing intercepted information to be disclosed or received in evidence unless the accused has been provided with a copy of the same atleast 10 days in advance, unless the period of 10 days is specifically waived by the judge.

[37] State owned Public Sector Undertakings (PSUs) (Mahanager Telephone Nigam Limited (MTNL) and Bharat Sanchar Nigam Limited (BSNL)) were issued licenses for provision of CMTS as third operator in various parts of the country. Further, 17 fresh licenses were issued to private companies as fourth cellular operator in September/ October, 2001, one each in 4 Metro cities and 13 Telecom Circles.

[38] Section 45.2 of the CMTS License.

[39] Section 41.09 of the CMTS License.

[40] Section 41.09 of the CMTS License.

[41] Section 44.4 of the CMTS License. Similar provision exists in section 44.11 of the CMTS License.

[42] Section 34.28 (xix) of the ISP License.

[43] Section 34.12 of the ISP License.

[44] Section 34.13 of the ISP License.

[45] Section 34.22 of the ISP License.

[46] Section 34.6 of the ISP License.

[47] Section 34.15 of the ISP License.

[48] Section 34.28 (xiv) of the ISP License.

[49] Section 34.28 (xi) of the ISP License.

[50] Section 34.14 of the ISP License.

[51] Section 34.28 (ix)&(x) of the ISP License.

[52] Section 30.1 of the ISP License.

[53] Section 33.4 of the ISP License.

[54] Section 34.4 of the ISP License.

[55] Section 34.7 of the ISP License.

[56] Section 34.9 of the ISP License.

[57] Section 34.27 (a)(i) of the ISP License.

[58] Section 34.27(a)(ii-vi) of the ISP License.

[59] Section 32.1, 32.2 (i)(ii), 32.3 of the ISP License.

[60] Section 34.8 of the ISP License.

[61] Section 34.18 of the ISP License.

[62] Section 34.28 (xv) of the ISP License.

[63] Section 41.10 of the ISP License.

[64] Section 41.10 of the ISP License.

[65] Section 41.19(i) of the ISP License.

[66] Section 41.19(ii) of the ISP License.

[67] Section 41.19(iv) of the ISP License.

[68] Section 39.1 of the UASL. Similar provision is contained in section 41.4, 41.12 of the UASL.

[69] Section 39.3 of the UASL.

[70] Section 39.2 of the UASL.

[71] Section 23.2 of the UASL. Similar provisions are contained in section 41.7 of the UASL regarding provision of monitoring equipment for monitoring in the “interest of security”.

[72] Section 42.2 of the UASL.

[73] Section 41.20(xx) of the UASL.

[74] Section 41.10 of the UASL.

[75] Section 41.10 of the UASL.

[76] Section 41.14 of the UASL.

[77] Section 41.16 of the UASL.

[78] Section 41.20(ix) of the UASL.

[79] Section 41.20(ix) of the UASL.

[80] Section 41.19(ii) of the UASL.

[81] Section 41.20(xii) of the UASL.

[82] Section 41.20(xiii) of the UASL.

[83] Section 41.20(xiv) of the UASL.

[84] Section 41.20 (xix) of the UASL.

[85] Section 41.20(xvi) of the UASL.

[86] The different services covered by the Unified License are:

a. Unified License (All Services)

b. Access Service (Service Area-wise)

c. Internet Service (Category-A with All India jurisdiction)

d. Internet Service (Category-B with jurisdiction in a Service Area)

e. Internet Service (Category-C with jurisdiction in a Secondary Switching Area)

f. National Long Distance (NLD) Service

g. International Long Distance (ILD) Service

h. Global Mobile Personal Communication by Satellite (GMPCS) Service

i. Public Mobile Radio Trunking Service (PMRTS) Service

j. Very Small Aperture Terminal (VSAT) Closed User Group (CUG) Service

k. INSAT MSS-Reporting (MSS-R) Service

l. Resale of International private Leased Circuit (IPLC) Service

Authorisation for Unified License (All Services) would however cover all services listed at para 2(ii) (b) in all service areas, 2 (ii) (c), 2(ii) (f) to 2(ii) (l) above.

[87] Chapter IV, Para 23.2 of the UL.

[88] Chapter VI, Para 40.2 of the UL.

[89] Chapter V, Para 37.1 of the UL. Similar provision is contained in Chapter VI, Para 39.4,

[90] Chapter V, Para 37.5 of the UL/

[91] Chapter V, Para 37.3 of the UL.

[92] Chapter V, Para 37.2 of the UL.

[93] Chapter VI, Para 39.23(xii) of the UL.

[94] Chapter VI, Para 39.23 (xiii) of the UL.

[95] Chapter VI, Para 39.23 (xiv) of the UL.

[96] Chapter VI, Para 39.23 (xix) of the UL.

[97] Chapter VIII, Para 8.3 of the UL.

[98] Chapter VIII, Para 8.4 of the UL.

[99] Chapter VIII, Para 8.5 of the UL.

[100] Chapter IX, Paras 7.1 to 7.3 of the UL. Further obligations have also been imposed on the Licensee to ensure that its ILL customers maintain the usage of IP addresses/Network Address Translation (NAT) syslog, in case of multiple users on the same ILL, for a minimum period of one year.

[101] Chapter IX, Paras 8.1 to 8.3 of the UL.

[102] Chapter IX, Paras 8.4 and 8.5 of the UL.

[103] Chapter X, Para 5.2 of the UL.

[104] Chapter XI, Para 6.3 of the UL.

[105] Chapter XI, Para 6.4 of the UL.

[106] Chapter XI, Para 6.6 of the UL.

[107] Chapter XI, Para 6.7 of the UL.

[108] Chapter XII, Para 7.4 of the UL.

[109] Chapter XII, Para 7.5 of the UL.

[110] Chapter XII, Para 7.6 of the UL.

[111] Chapter XII, Para 7.7 of the UL.

[112] Chapter XII, Para 7.8 of the UL.

[113] Chapter XIII, Para 7.1 of the UL.

[114] Chapter XIV, Para 8.1 of the UL.

[115] Chapter XIV, Para 8.2 of the UL.

[116] Chapter XV, Para 8.1 of the UL.

[117] Chapter XV, Para 8.5 of the UL.

[118] Chapter XVI, Paras 4.1 - 4.4 of the UL.

[119] Section 69 of the Information Technology Act, 2000.

[120] Ibid.

[121] Section 69B of the Information Technology Act, 2000.

[122] Section 32 of the ISP License.

[123] Rule 3, Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009.

[124] Rule 2(d), Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009.

[125] Rule 3, Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009.

[126] Rule 6, Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009.

[127] Rule 4, Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009.

[128] Rule 5, Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009.

[129] Rule 13, Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009.

[130] Rule 7, Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009.

[131] Rule 8, Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009.

[132] Rule 9, Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009.

[133] Rule 10, Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009.

[134] Rule 11, Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009.

[135] Rule 25(2)&(6), Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009.

[136] Rule 23, Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009.

[137] Rule 25, Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009.

[138] Rule 12, Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009.

[139] Rule 23(2), Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009.

[140] Rule 19, Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009.

[141] Rule 17, Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009.

[142] Rule 18, Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009.

[143] Rule 20& 21, Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009.

[144] Rule 25, Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009.

[145] Rule 20, Information Technology (Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009.

[146] Rule 3(1) of the Information Technology (Procedure and Safeguards for Blocking for Access of Information by Public) Rules, 2009.

[147] Rule 3(2) of the Information Technology (Procedure and Safeguards for Blocking for Access of Information by Public) Rules, 2009.

[148] Rule 3(3) of the Information Technology (Procedure and Safeguards for Blocking for Access of Information by Public) Rules, 2009.

[149] Rules 7 of the Information Technology (Procedure and Safeguards for Blocking for Access of Information by Public) Rules, 2009.

[150] Introduction to the Information Technology (Guidelines for Cyber Cafe) Rules, 2011.

[151] The Indian Post Office Act, 1898, http://www.indiapost.gov.in/Pdf/Manuals/TheIndianPostOfficeAct1898.pdf

[152] The expression “wireless telegraphy apparatus” has been defined as “any apparatus, appliance, instrument or material used or capable of use in wireless communication, and includes any article determined by rule made under Sec. 10 to be wireless telegraphy apparatus, but does not include any such apparatus, appliance, instrument or material commonly used for other electrical purposes, unless it has been specially designed or adapted for wireless communication or forms part of some apparatus, appliance, instrument or material specially so designed or adapted, nor any article determined by rule made under Section 10 not to be wireless telegraphy apparatus;”

[153] Section 4, Wireless Telegraphy Act, 1933.

[154] Snehashish Ghosh, Indian Wireless Telegraphy Act, 1933, http://cis-india.org/telecom/resources/indian-wireless-telegraphy-act.

[155] The Code of Criminal Procedure, 1973, Section 91, http://www.icf.indianrailways.gov.in/uploads/files/CrPC.pdf

For more details visit https://cis-india.org/internet-governance/blog/policy-paper-on-surveillance-in-india

Right to Privacy in Peril

vipul — 2015-08-13T15:32:18Z

It seems to have become quite a fad, especially amongst journalists, to use this headline and claim that the right to privacy which we consider so inherent to our being, is under attack. However, when I use this heading in this piece I am not referring to the rampant illegal surveillance being done by the government, or the widely reported recent raids on consenting (unmarried) adults who were staying in hotel rooms in Mumbai. I am talking about the fact that the Supreme Court of India has deemed it fit to refer the question of the very existence of a fundamental right to privacy to a Constitution Bench to finally decide the matter, and define the contours of such right if it does exist.

In an order dated August 11, 2015 the Supreme Court finally gave in to the arguments advanced by the Attorney General and admitted that there is some “unresolved contradiction” regarding the existence of a constitutional “right to privacy” under the Indian Constitution and requested that a Constitutional Bench of appropriate strength.

The Supreme Court was hearing a petition challenging the implementation of the Adhaar Card Scheme of the government, where one of the grounds to challenge the scheme was that it was violative of the right to privacy guaranteed to all citizens under the Constitution of India. However to counter this argument, the State (via the Attorney General) challenged the very concept that the Constitution of India guarantees a right to privacy by relying on an “unresolved contradiction” in judicial pronouncements on the issue, which so far had only been of academic interest. This “unresolved contradiction” arose because in the cases of M.P. Sharma & Others v. Satish Chandra & Others,[1] and Kharak Singh v. State of U.P. & Others,[2] (decided by Eight and Six Judges respectively) the Supreme Court has categorically denied the existence of a right to privacy under the Indian Constitution.

However somehow the later case of Gobind v. State of M.P. and another,[3] (which was decided by a two Judge Bench of the Supreme Court) relied upon the opinion given by the minority of two judges in Kharak Singh to hold that a right to privacy does exist and is guaranteed as a fundamental right under the Constitution of India.[4] Thereafter a large number of cases have held the right to privacy to be a fundamental right, the most important of which are R. Rajagopal & Another v. State of Tamil Nadu & Others,[5] (popularly known as Auto Shanker’s case) and People’s Union for Civil Liberties (PUCL) v. Union of India & Another.[6] However, as was noticed by the Supreme Court in its August 11 order, all these judgments were decided by two or three Judges only.

The petitioners on the other hand made a number of arguments to counter those made by the Attorney General to the effect that the fundamental right to privacy is well established under Indian law and that there is no need to refer the matter to a Constitutional Bench. These arguments are:

(i) The observations made in M.P. Sharma regarding the absence of right to privacy are not part of the ratio decidendi of that case and, therefore, do not bind the subsequent smaller Benches such as R. Rajagopal and PUCL.

(ii) Even in Kharak Singh it was held that the right of a person not to be disturbed at his residence by the State is recognized to be a part of a fundamental right guaranteed under Article 21. It was argued that this is nothing but an aspect of privacy. The observation in para 20 of the majority judgment (quoted in footnote 2 above) at best can be construed only to mean that there is no fundamental right of privacy against the State’s authority to keep surveillance on the activities of a person. However, they argued that such a conclusion cannot be good law any more in view of the express declaration made by a seven-Judge bench decision of this Court in Maneka Gandhi v. Union of India & Another.[7]

(iii) Both M.P. Sharma (supra) and Kharak Singh (supra) were decided on an interpretation of the Constitution based on the principles expounded in A.K. Gopalan v. State of Madras,[8] which have themselves been declared wrong by a larger Bench in Rustom Cavasjee Cooper v. Union of India.[9]

Other than the points above, it was also argued that world over in all the countries where Anglo-Saxon jurisprudence is followed, ‘privacy’ is recognized as an important aspect of the liberty of human beings. The petitioners also submitted that it was too late in the day for the Union of India to argue that the Constitution of India does not recognize privacy as an aspect of the liberty under Article 21 of the Constitution of India.

However these arguments of the petitioners were not enough to convince the Supreme Court that there is no doubt regarding the existence and contours of the right to privacy in India. The Court, swayed by the arguments presented by the Attorney General, admitted that questions of far reaching importance for the Constitution were at issue and needed to be decided by a Constitutional Bench.

Giving some insight into its reasoning to refer this issue to a Constitutional Bench, the Court did seem to suggest that its decision to refer the matter to a larger bench was more an exercise in judicial propriety than an action driven by some genuine contradiction in the law. The Court said that if the observations in M.P. Sharma (supra) and Kharak Singh (supra) were accepted as the law of the land, the fundamental rights guaranteed under the Constitution of India would get “denuded of vigour and vitality”. However the Court felt that institutional integrity and judicial discipline require that smaller benches of the Court follow the decisions of larger benches, unless they have very good reasons for not doing so, and since in this case it appears that the same was not done therefore the Court referred the matter to a larger bench to scrutinize the ratio of M.P. Sharma (supra) and Kharak Singh (supra) and decide the judicial correctness of subsequent two judge and three judge bench decisions which have asserted or referred to the right to privacy.

[1] AIR 1954 SC 300. In para 18 of the Judgment it was held: “A power of search and seizure is in any system of jurisprudence an overriding power of the State for the protection of social security and that power is necessarily regulated by law. When the Constitution makers have thought fit not to subject such regulation to constitutional limitations by recognition of a fundamental right to privacy, analogous to the American Fourth Amendment, we have no justification to import it, into a totally different fundamental right, by some process of strained construction.”

[2] AIR 1963 SC 1295. In para 20 of the judgment it was held: “… Nor do we consider that Art. 21 has any relevance in the context as was sought to be suggested by learned counsel for the petitioner. As already pointed out, the right of privacy is not a guaranteed right under our Constitutionand therefore the attempt to ascertain the movement of an individual which is merely a manner in which privacy is invaded is not an infringement of a fundamental right guaranteed by Part III.”

[3] (1975) 2 SCC 148.

[4] It is interesting to note that while the decisions in both Kharak Singh and Gobind were given in the context of similar facts (challenging the power of the police to make frequent domiciliary visits both during the day and night at the house of the petitioner) while the majority in Kharak Singh specifically denied the existence of a fundamental right to privacy, however they held the conduct of the police to be violative of the right to personal liberty guaranteed under Article 21, since the Regulations under which the police actions were undertaken were themselves held invalid. On the other hand, while Gobind held that a fundamental right to privacy does exist in Indian law, it may be interfered with by the State through procedure established by law and therefore upheld the actions of the police since they were acting under validly issued Regulations.

[5] (1994) 6 SCC 632.

[6] (1997) 1 SCC 301.

[7] (1978) 1 SCC 248.

[8] AIR 1950 SC 27.

[9] (1970) 1 SCC 248.

For more details visit https://cis-india.org/internet-governance/blog/right-to-privacy-in-peril

RBI Consultation Paper on P2P Lending: Data Security and Privacy Concerns

vipul — 2016-06-01T11:41:17Z

On April 28, 2016 the Reserve Bank of India published a consultation paper on P2P Lending and invited comments from the public on the same. The Paper discusses what P2P lending is, the various regulatory practices that govern P2P lending in different jurisdictions and lists our arguments for and against regulating P2P lending platforms.

Arguments against Regulation

The arguments against regulation of P2p lending companies as set out in the paper are (briefly):

Regulating an exempt or nascent sector may be perceived as rubber stamping the industry through regulation, thus lending credibility to the P2P lending which could attract ill informed lenders to the sector who may not understand all the risks associated with the industry. In this way Regulation may cause more harm than good.
Regulations may also be perceived as too stringent, thus stifling the growth of an innovative, efficient and accessible industry.
The P2P lending market is currently in a nascent stage and does not pose an immediate systemic risk meriting regulation.

Arguments in favour of Regulation

The arguments for regulating the market on the other hand are:

Considering the significance of the online industry and the impact which it can have on the traditional banking channels/NBFC sector, it would be prudent to regulate this emerging industry.
The, the importance of these methods of financing, specially in sectors where formal lending cannot reach, needs to be acknowledged.
If the sector is left unregulated altogether, there is the risk of unhealthy practices being adopted by one or more players, which may have deleterious consequences.
Section 45S of RBI Act prohibits an individual or a firm or an unincorporated association of individuals from accepting deposits “if its business wholly or partly includes any of the activities specified in clause (c) of section 45-I (i.e. activities of a financial institution); or if his or its principal business is that of receiving of deposits under any scheme or arrangement or in any other manner, or lending in any manner. Contravention of Section 45S is an offence punishable under section 58B (5A) of RBI Act. As per the Act, ‘‘deposit’’ includes and shall be deemed always to have included any receipt of money by way of deposit or loan or in any other form, but does not include any amount received from an individual or a firm or an association of individuals not being a body corporate, registered under any enactment relating to money lending which is for the time being in force in any State. Since the borrowers and lenders brought together by a P2P platform could fall within these prohibitions, absence of regulation may lead to perpetrating an illegality.”

After listing out the arguments, the paper adopts the approach of regulating this industry and proposes to bring P2P lending platforms under the purview of RBI’s regulation by defining them as Non Banking Financial Companies (NBFCs) under section 45-I(f)(iii) of the RBI Act. Once notified as NBFCs, RBI can issue regulations under sections 45JA and 45L. Though there is scope to comment on many aspects of the consultation paper our comments here will be limited to the data security and privacy aspects of the recommendations.

Data Security and Privacy Concerns

While the understanding of potential borrowers, specially those who have had experiences with commercial financial institutions, is that the more amount of information they provide, the better their chances become of getting a loan. This perception emanates from the fact that any potential borrower is asked for a myriad of documents, including personally identifying documents before a request for a loan is considered, infact for almost all financial institutions it is part of their core prudential norms to ask for identity documents before disbursing a loan. Getting as much information as possible from the borrower is not just a quirk of the financial institutions but it makes business sense for them, since it is those institutions who bear the risk of recovery of their money. There is no reason why the same logic or allowing creditors all the information about the borrower should not be applicable to P2P lending platforms, as far as the principle of prudential business practices is concerned. However, the key difference between disclosing information to P2P lending platforms as opposed to financial institutions is that whilst the information supplied to financial institutions stays limited to the institution and its employees, a large amount of the information (though not necessarily all) given to P2P platforms is made available to all potential creditors, which in P2P lending translates to any internet user who registers as a potential creditor. In this way the potential for the information to reach a wider group of people is much higher and therefore privacy and data security risks require special attention in P2P lending.

In section 5.3(v) of the Paper it is recommended that “Confidentiality of the customer data and data security would be the responsibility of the Platform. Transparency in operations, adequate measures for data confidentiality and minimum disclosures to borrowers and lenders would also be mandated through a fair practices code.” Whilst the fair practices code has not yet been developed or at least not yet made publicly available, as companies in the P2P lending industry are body corporates, these fair practice codes should be in line with and satisfy the requirements of section 43A of the Information Technology Act, 2000 (“IT Act”) as well as the Guidelines issued by the RBI’s Guidelines on Information security, Electronic Banking, Technology risk management and cyber frauds [1].

The minimum standards for data protection in Indian law have been laid down by section 43A of the IT Act and the Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules, 2011 (“Rules”) issued under section 43A. As per Rule 4 of the Rules P2P platforms would be required to have a privacy policy to deal with sensitive personal data, which includes any details regarding financial information such bank account, credit/debit cards, etc [2].

This policy would have to be published on the website of the platforms and would provide for a number of things such as (i) Clear and easily accessible statements of its practices and policies; (ii) type of personal or sensitive personal data or information collected; (iii) purpose of collection and usage of such information; (iv) disclosure of information including sensitive personal data or information; (v) reasonable security practices and procedures for the data. The other requirements of the Rules as regards consent before usage of the information, collection limitations, imparting information/notice to the consumer (information provider), retention limitation, purpose limitation, opt-out option, disclosure, etc. will also be applicable to P2P platforms and the fair practices code that the RBI would issue for this purpose will have to take all these issues into account.

The Rules also provide that body corporates will be considered to have complied with reasonable security practices if they have implemented such security practices and standards and have a comprehensive documented information security programme and information security policies that contain managerial, technical, operational and physical security control measures that are commensurate with the information assets being protected with the nature of business. Although there are no such practices which have been endorsed by any governmental body for P2P lending platforms, however the Department of Banking Supervision, Reserve Bank of India, has issued guidelines on “Information security, Electronic Banking, Technology risk management and cyber frauds" [3]. which could be relied upon until a fair practices code is put into place. The major privacy and data security provisions of these guidelines are given below:

Security Baselines: The guidelines require banks to be proactive in identifying and specifying the minimum security baselines to be adhered to by the service providers to ensure confidentiality and security of data;
Back up records: A cloud computing system must ensure backup of all its clients' information;
Security steps: An institution may take the following steps to ensure that risks with respect to confidentiality and security of data are adequately mitigated: (i) Address, agree, and document specific responsibilities of the respective parties in outsourcing; (ii) Discuss and agree on the instances where customer data shall be accessed; (iii) Ensure that service provider employees are adequately aware and informed on the security and privacy policies.
Confidentiality: Agreements should provide for maintaining confidentiality of customer's information even after the contract expires or is terminated by either party and specify the liability in case of security breach or leakage.
Encryption: Normally, a minimum of 128-bit SSL encryption is expected. Banks should only select encryption algorithms which are well established international standards.
Fraud Risk Management: It is also necessary that customer confidential information and other data/information available with banks is secured adequately to ensure that fraudsters do not access it to perpetrate fraudulent transactions.

Although inclusion of the above principles in the fair practices code would be helpful, however since the workings of P2P platforms are quite unique, therefore it would be counterproductive to restrict the security and privacy protocols to only those applied to regular banking transactions and the fair practices code should take into account these unique problems of P2P lending rather than seek to apply the existing norms blindly.

Endnotes

[1] See: https://rbidocs.rbi.org.in/rdocs/content/PDFs/GBS300411F.pdf.

[2] The Rules define “sensitive personal data or information” as information relating to: "(i) password, (ii) financial information such as Bank account or credit card or debit card or other payment instrument details, (iii) physical, physiological and mental health condition, (iv) sexual orientation, (v) medical records and history, (vi) Biometric information, (vii) any detail relating to the above clauses as provided to body corporate for providing service, and (viii) any of the information received under above clauses by body corporate for processing, stored or processed under lawful contract or otherwise."

[3] See: http://rbidocs.rbi.org.in/rdocs/content/PDFs/GBS300411F.pdf.

For more details visit https://cis-india.org/raw/rbi-consultation-paper-on-p2p-lending