Legal Requirements To Start An E-Commerce Website In India

We have been receiving lots of queries regarding successful and legal opening of e-commerce business in India. We have already explained the legal formalities required for starting e-commerce business in India. In this article we would discuss the legal requirements for starting an e-commerce websites in India.

To start with, we would like to say that we have no dedicated e-commerce laws and regulations in India and they are still evolving. The Information Technology Act 2000 (IT Act 2000) governs the online issues of e-commerce in India.

IT Act 2000 is the sole cyber law of India. The cyber law of India mandates that the e-commerce entrepreneurs and owners must ensure cyber law due diligence in India. The cyber law due diligence for companies in India has already become very stringent and many foreign and Indian companies and websites have been prosecuted in India for non exercise of cyber due diligence.

E-commerce entrepreneurs and owners in India must understand that legal issues of e-commerce in India are different for different categories of e-commerce. For instance, electronic trading of medical drugs in India requires more stringent e-commerce and legal compliances as compared to other e-commerce activities. Digital communication channels for drugs and healthcare products in India are scrutinised more aggressively than other e-commerce activities. In fact, regulatory and legislative measures to check online pharmacies trading in banned drugs in India are already in pipeline.

The legal requirements for undertaking e-commerce in India also involve compliance with other laws like contract law, Indian penal code, etc. Further, online shopping in India also involves compliance with the banking and financial norms applicable in India. For instance, take the example of PayPal in this regard. If PayPal has to allow online payments receipt and disbursements for its existing or proposed e-commerce activities, it has to take a license from Reserve Bank of India (RBI) in this regard. Further, cyber due diligence for Paypal and other online payment transferors in India is also required to be observed.

Perry4Law and Perry4Law Techno Legal Base (PTLB) recommend that all e-commerce entrepreneurs and owners must do a proper techno legal due diligence before opening an e-commerce website. The Internet intermediary liability in India may be frequently invoked against e-commerce websites in India. The Information Technology (Intermediary Guidelines) Rules 2011 prescribes stringent liabilities for e-commerce websites in India. Further, e-commerce websites in India must ensure privacy protection, data protection, data security, cyber security, confidentiality maintenance, etc as well.

Legal Issues In E-Commerce In India

Electronic commerce is one of the most profitable business ventures in India these days. Not only its present growth is good but even its future and projected growth is tremendous.

However, e-commerce in India is also required to be conducted in a legally permissible manner. This is more so when the information technology act 2000 (IT Act 2000) prescribes stringent penal and pecuniary penalties for violation of its provisions during e-commerce transactions.

The natural question arises as to what are the basic e-commerce laws in India that various e-commerce players must adhere to in order to escape civil and criminal sanctions? Although we have no dedicated electronic commerce laws in India yet the IT Act 2000 covers many aspects of the same. IT Act 2000 is the sole cyber law of India that has been invoked on numerous counts against e-commerce portals and Internet intermediaries in India who violated the provisions of the same.

The legal requirements for undertaking e-commerce in India also involve compliance with other laws like contract law, Indian penal code, etc. Further, online shopping in India also involves compliance with the banking and financial norms applicable in India. For instance, take the example of PayPal in this regard. If PayPal has to allow online payments receipt and disbursements for its existing or proposed e-commerce activities, it has to take a license from Reserve Bank of India (RBI) in this regard. Further, cyber due diligence for Paypal and other online payment transferors in India is also required to be observed.

With the active use of electronic commerce in India the electronic commerce dispute resolution in India is also required to be strengthened. The present litigation system of India is not conducive for the growth of e-commerce n India and online dispute resolution in India is more appropriate for such purposes.

Perry4Law and Perry4Law Techno Legal Base (PTLB) have launched dedicated platforms for resolving e-commerce, domain name, commercial, technological and cross border disputes resolution in India and word wide. These include platforms named Electronic Courts, E-Judiciary, ODR India, Online Arbitration, etc.

Finally, for those who wish to engage in cloud computing, virtualisation and other Internet based services in India, Perry4Law and PTLB recommend that they comply with techno legal regulations of India. Virtualisation and cloud computing service providers in India must not only follow the encryption laws of India but they must also ensure cyber law due diligence in India. This is more so when the cyber law due diligence for companies in India has become very stringent and foreign companies and websites are frequently prosecuted in India for non exercise of cyber due diligence.

Perry4Law and PTLB wish all the best to all e-commerce players in India and abroad.

Electronic Commerce Regulations And Laws In India

Electronic commerce is an area whose legal formalities cannot be taken lightly. Electronic commerce involves multiple jurisdictions and at times multiple laws of different countries are applicable to a single electronic commerce website.

Further, the landscape for electronic commerce dispute resolution in India is also fast changing. With more and more stress upon online disputes resolution (ODR) in India electronic commerce disputants now prefer ODR as a mechanism for dispute resolution. Corporate disputes resolution through ODR in India is also being explored. E-courts and ODR have also added their own valued to electronic commerce and corporate dispute resolutions in India.

Electronic commerce in India is witnessing a good growth due to progressive policies and liberal foreign direct investments (FDIs). E-commerce uses information and communication technology (ICT) to operate. Although many technological aspects are also taken care of by an e-commerce platform, yet establishment and running of an e-commerce website is the most important requirement.

Internet is boundary less and a website hosted in a particular country can be accessed from any part of the world. Further, there may be cases where a websites located in a particular country may attract legal jurisdictions of multiple countries. Thus, compliance with the laws of the principal country as well as those countries where such e-commerce websites targets audience and customers is of prime importance.

There have been instances where e-commerce websites located in India failed to observe cyber law due diligence in India and e-commerce regulations and laws in India. Criminal trials and criminal liabilities have been imposed by Indian legal system upon such websites. The bazee.com case and the criminal and civil trials against companies like Google, Yahoo, Facebook, Microsoft, etc are few examples of the same. Such cases against e-commerce websites and foreign companies would further increase and e-commerce players must appoint nodal officers in India to comply with Indian laws.

Thus, not only legal requirements for undertaking e-commerce in India are stringent but even Internet intermediaries liability in India must be taken seriously by companies engaged in online transactions and businesses. We have no dedicated e-commerce laws in India but the information technology act 2000 (IT Act 2000) covers basic level e-commerce legal framework in India. The IT Act 2000 also prescribes cyber due diligence for foreign websites in India.

E-commerce due diligence in India is a much needed requirement that all e-commerce players, whether Indians or foreign, must undertake as soon as possible. Non observation of local and foreign laws can tarnish the image and brand of a company that cannot be regained again. It is better to err on the side of precaution rather than caught on the wrong side of the law.