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.

Cash On Delivery May Harm E-Commerce In India

E-commerce players in India are trying every possible method to woo customers. Besides discounts, cash on delivery (COD) has been developed as a mechanism to enhance consumer’s and customer’s trust in the e-commerce business model.

Cash on delivery has an obvious advantage that consumers in India are more comfortable with the same. However, it has a major drawback as well .Cash on delivery results in delayed payments, higher rejection rates and longer turnaround.

Cash on delivery method was devised at a time when there was limited knowledge and little awareness about e-commerce in India. Similarly, sticking to cash on delivery was also required as there was not much broadband penetration, technological access and technology awareness among Indian masses.

Now things have changed and sticking to the old cash on delivery method may not be productive in the long run. Perry4Law and Perry4Law Techno Legal Base (PTLB) believe that in an ideal e-commerce model, cash on delivery percentage should not be more than 20% of the total e-commerce sales and revenues. If it is more than 20%, additional costs and unintended inefficiencies may creep in.

While public awareness about both e-commerce and technology use may have increased yet Indian e-commerce industry is suffering from a serious drawback. We have no dedicated e-commerce laws and regulations in India. E-commerce legal issues are still governed by the information technology act, 2000 (IT Act 2000) that is the cyber law of India. We need a dedicated e-commerce law in India to meet the growing techno legal challenges of e-commerce.

A sound legal framework is also required as future shift from cash on delivery to online payments would raise many techno legal issues that Indian e-commerce players have yet to face. A new e-commerce legal framework for India must be established as soon as possible.

E-commerce platforms can be greatly benefited if they have an internal or affiliated dispute resolution mechanism at place. For example, use of online dispute resolution (ODR) in India can be a good option at e-commerce platforms. In fact, use of ODR for e-commerce disputes resolution is the latest trend word over.

We at Perry4Law and PTLB are managing the exclusive techno legal e-courts centre and ODR centre of India where techno legal disputes of e-commerce platforms, corporate houses, individuals, international organisations, etc are resolved.

If you are an e-commerce platform that wishes to safeguard your techno legal interests, feel free to contact us in this regard with your proposal. We would take care of all your techno legal issues pertaining to e-commerce.