Foreign investors are exploring investments options in Indian technology venture and e-commerce business through direct and indirect means. Many e-commerce players have been benefited by this foreign investment drive. These foreign investors are also doing legal due diligence before investing in technology ventures and e-commerce business in India.
However, foreign investors are not taking care of cyber law due diligence requirements (PDF) as prescribed by Indian laws. In particular, they are exposing themselves to Internet intermediary liability and cyber law violations under the Information Technology Act, 2000 (IT Act, 2000). Further, they are also not ascertaining whether the technology ventures and e-commerce businesses have complied with legal issues of e-commerce in India.
For instance, investors like Netprice, SoftBank, SBI Holdings, Hitachi, etc have been on an investment spree in India. They have invested into many technology startups and e-commerce ventures in India. However, it is not clear how many of them have actually conducted a cyber law due diligence requirement as per Indian laws.
Take the example of online payment market of India in which foreign investors have shown great interest. The mobile payment market of India is booming but most of the mobile payment service providers are not complying with Indian laws. Now if the foreign investors and the people doing legal due diligence themselves are not aware of the cyber law due diligence requirements, these violations would go unnoticed and would create legal troubles in the future.
Many foreign companies are presently facing litigations in India for violating Indian laws. The Google’s online defamation case is the leading example of this scenario that is going to increase in the near future as cyber litigation against foreign websites and companies is going to increase. Taking clue from these developments, Apple has recently decided to remove Blockchain application from its app store.
The legal risks for websites companies developing e-commerce and online gaming websites in India have also increased significantly. Similarly, entrepreneurs dealing with the fields like encryption, cloud computing, m-health, telemedicine, online pharmacies, Bitcoins exchanges, adult merchandise, online travel, online gaming including online poker, etc are not complying with techno legal requirements of Indian laws. Investing in such legally risky ventures is not a viable strategy.
We at Perry4Law recommends that while investing in online businesses and e-commerce businesses it is a good idea to pay more attention to cyber law due diligence than a simple legal due diligence as the latter fails to cover the legal risks arising due to techno legal aspects.