What is an Electronic Signature?
Generally speaking, an electronic signature (or e-signature) is a technical process logically associated with a document which two (or more) individuals or organizations (the signatories) agree to rely on in order to express their intent to sign such document. Three components are therefore necessary: a document, a signatory and an e-signature tool. While the tool most commonly used for handwritten signatures is a simple pen, electronic signature tools are typically more complex.
From a regulatory standpoint, an electronic signature is a broad category that encompasses many types (or levels) of electronic signatures.
Depending on the country it is used in, there are differences in purpose, legal acceptance, technical implementation and cultural acceptance of electronic signatures. In particular, e-signature requirements tend to vary significantly between most “civil law” countries (including the European Union and many countries in South America and Asia), and most “common law” countries (such as the United States, Canada and Australia). Civil law countries typically support a “tiered” approach including higher levels of signature often called digital or qualified electronic signatures (typically required for specific types of contracts), as opposed to common law jurisdictions which are typically more technology-neutral.
What are the laws and regulations in India?
Electronic signatures are permitted in India, but the legal presumption in favor of validity only applies to digital and electronic signatures recognized by the Information Technology Act, 2000. Note that there is no specific requirement under the Indian Contract Act, 1872 that an agreement must be signed to be valid.
Other electronic signatures, including DocuSign, do not currently have the presumption of the same legal validity as a wet signature in India. If disputes arise relating to the authenticity of an electronic signature not recognized under the Information Technology Act, it would need to be proved that the person signing intended to sign and approve the document. In addition, it would have to be demonstrated that:
- the electronic signature can only be linked to that person;
- that person had sole control over the signature at the time of signing;
- any subsequent alterations are detectable; and,
- the requirements of a valid contract under the Indian Contract Act, 1872 are met (such as offer, acceptance, intention to create a legal relationship, etc.)
Is an electronic signature valid in India?
Yes. The Information Technology Act recognizes two types of e-signatures:
Electronic signatures must be considered reliable and be specified in the Second Schedule of the Information Technology Act. To be considered reliable:
- the authentication/creation data used must be linked to the signatory;
- the authentication/creation data must be under the control of the signatory (at the time of signing); and,
- all changes/alterations to the signature and the data must be detectible after signing.
At this time, the only electronic authentication technique specified is Aadhaar e-KYC services. Under Aadhar e-KYC services, a signature is linked with the individual’s Aadhar (a unique identity number issued to Indian residents) and a One Time Password (OTP) is generated. The individual can then use this signature to electronically sign documents.
Digital signatures employ asymmetric crypto systems and hash functions which have been issued by a licensed certifying authority.
To authenticate electronic signatures or digital signatures under the Information Technology Act, a licensed Certifying Authority would need to validate the signature and issue either an Electronic Signature Certificate (ESC) or a Digital Signature Certificate (DSC).
There are some cases where digital and electronic signatures are not permitted, including negotiable instruments, Powers of Attorney, trusts, wills and documents relating to sale/conveyance/interest in immovable property.
HR Best Practices: In the context of HR, signatures can be signed electronically and considered valid under the Information Technology Act if they meet the digital signature or electronic signature requirements. That said, at this time it’s not common for individuals to obtain ESCs or DSCs, so getting an employee’s electronic signature may be challenging.
In addition, courts in India normally prefer paper contracts over forms of electronic signatures not recognized under the Information Technology Act. As employment contracts are the primary document in employee/employer disputes, employers generally rely on wet signatures.
Led by PeopleDoc’s Chief Legal & Compliance Officer, the HR Compliance Assist team relies on a network of internal and external compliance experts and lawyers, including the global law firm Morgan Lewis, to provide clients with best practices and recommendations on topics such as HR document retention, employee data privacy, and HR electronic records. HR Compliance Assist also provides local compliance monitoring and alert services in select countries where PeopleDoc’s customers have employees. HR Compliance Assist is a service exclusively available to PeopleDoc customers.