Monthly Archives: February 2014

Cyber Law Due Diligence Must For Foreign Investors In E-Commerce And Technology Ventures Of India

Cyber Law Due Diligence Must For Foreign Investors In E-Commerce And Technology Ventures Of IndiaForeign 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.

Online Payment Market Of India And E-Commerce And Online Business Legal Compliances

Online Payment Market Of India And E-Commerce And Online Business Legal CompliancesOnline payment has become an easy and convenient method to pay bills and other charges from the ease of an individual’s home. Many entrepreneurs in India have started exploring online bills payment and online expenses reimbursement e-commerce models in India. This is a clear indication that online payment market of India is going to flourish in the near future.

However, while starting an online payment portal or e-commerce website in India, the entrepreneurs must also keep in mind the requirements of Internet intermediary liability in India and cyber law due diligence in India (PDF). There are many legal issues of e-commerce in India that various online payment service providers of India must comply with. Perry4Law has already specified the cyber law due diligence requirements for Paypal and online payment transferors in India.

The integration of online payment with virtual currency is another challenge that has to be addressed by online payment service providers of India as it involves many legal risks. The Bitcoins exchanges operating in Indian are not complying with the legal requirements and this is attracting the attention of Indian law enforcement agencies. The Enforcement Directorate (ED) has already searched few Bitcoin websites in India as it believes that Bitcoins money can be used for hawala transactions and funding terror operations. Indian corporates have started lobbying for regulating digital currencies like Bitcoins in India.

The Indian banking regulatory environment in India is fast changing though much still has to be done in this regard. The banking, financial and regulatory environment in India is becoming very conducive for online payment market of India. A Code of Bank’s Commitment to Customers by Banking Codes and Standards Board of India (BCSBI) has also been prescribed to empower banking customers. The Securities and Exchange Board of India (SEBI) would also release corporate governance rules for the Listed Entities in India.

Companies like PayPal have already realised the potential of online payment markets of China and India. PayPal is planning to make its presence in India and China more prominent. Another reason why companies like PayPal are entering into Indian market is the strong growth of e-commerce in India. With the growth of e-commerce and e-governance in India, online payment market would also grow. For instance, electronic delivery of services in India would also result in a parallel growth of online payment platforms in India.

In fact, an electronic delivery of services bill of India 2011 has already been adopted by Indian government and it may become an applicable law very soon when the parliament of India clears the same. Add to this the initiatives of mobile governance in India. Very soon we may have an implementable m-governance policy of India. Also an integrated modern banking law for India is in pipeline that may strengthen online payments making in India.

While things are happening in the right direction yet there are some shortcomings as well. For instance, a majority of e-commerce payments are still made in an offline manner. The cash on delivery may harm e-commerce in India in the long run. A shift toward online payments is not only desirable but is also inevitable.

Similarly, e-commerce players, online payment companies and websites in India are still not aware of the key provisions of cyber law of India. E-commerce players and online payment management companies are still not aware about the Information Technology (Intermediaries Guidelines) Rules 2011 (PDF) of India.

Similarly, both e-commerce platforms and online payment companies are required to ensure cyber law due diligence in India. The cyber law due diligence for Indian companies is very stringent and there is no reason to take it lightly. In fact, cyber due diligence for foreign and Indian websites in India is an issue that is frequently agitated before Indian courts. Further, legal requirements of undertaking e-commerce in India must also be strictly followed.

While the opportunities for e-commerce and online payment companies are great yet the corresponding obligations are also equally troublesome. If e-commerce and online payment companies wish to make good profits they have to ensure sound compliance with Indian laws, especially the cyber law of India.

Online Pharmacies In India: Legal Requirements

Online Pharmacies In India Legal RequirementsPharmacies across the Indian are regulated by various laws prescribed by India in this regard. When websites are used to expand the pharmacy business and activities, certain additional laws and regulations are required to be complied with by such online pharmacies.

The pharmaceuticals e-commerce legal issues in India are now well established. Even the Ayurvedic e-commerce legal issues in India are evolving. However, despite this fact, the illegal and unregulated online sale of prescribed medicines in India is on rise. Now even the Ayurveda websites have joined this race and they are offering their products in active violation of various Indian laws.

Though healthcare is a very lucrative field in India yet it is also very vast in nature. The legal formalities required to provide online health related services are too vast and complicated to be easily understood. As a result, the healthcare industry of India is violating the laws of India while providing respective services.

We have different set of rules and laws for m-health, e-health, telemedicine, online pharmacies, online sale of prescribed drugs and medicines, e-ayurveda, etc. The digital communication channels for drugs and healthcare products in India must also be in strict conformity with Indian laws.

Even the website companies that are designing, uploading and managing these websites are vulnerable to many legal risks. The legal issues of e-commerce in India are also required to be complied with online pharmacies entrepreneurs in India. In fact, the online pharmacies websites of India are already under regulatory scanner of Indian government.

Online pharmacies websites are Internet intermediaries within the meaning of Information Technology Act, 2000 and they are also required to comply with cyber law due diligence requirements (PDF) in India.

E-commerce websites in India are required to comply with many legal requirements in India. These legal requirements are also required to be complied with by online pharmacies websites operating in India.  This must be done in a voluntary manner and before any law enforcement agency starts prosecuting such online pharmacy websites in India.

Ayurvedic E-Commerce Legal Issues In India

Ayurvedic E-Commerce Legal Issues In IndiaIndia is presently witnessing the booming alternative medicine market and many entrepreneurs have decided to plunge into this pool. The traditional reach of Ayurveda is limited and only those who have express knowledge about the Ayurveda clinics and establishments approach them.

Despite its limited growth in India, Ayurveda has found favour with western countries and tourists and residents of these countries frequently visit India to avail the benefits of Ayurveda. Indian Ayurveda practitioners and clinics have also realised that Ayurveda is a field that is going to flourish in the near future.

In order to expand their reach these Ayurveda practitioners and clinics are trying to explore the e-commerce route. Although this is a good strategy yet this also requires techno legal compliances on the part of Ayurveda practitioners and clinics.

Recently the classical ayurvedic medicines that were sold with prefixes and suffixes were banned by ministry of health and family welfare of India under Drug and Cosmetic Rules. The ban has been imposed to stop the alteration in the classical formulation of Ayurvedic medicines. Many ayurvedic medicines such as Chyawanprash, Rhumayog and others are currently marketed under different brand names, with prefixes and suffixes to reflect the value added qualities.

This is just a single example of the legal compliances that the Ayurveda practitioners and clinics in India are required to comply with. If these Ayurveda practitioners and clinics plan to use the e-commerce model to reach unlimited population, they have to comply with additional legal provisions to stay legal.

We have different set of rules and laws for m-health, e-health, telemedicine, online pharmacies, online sale of prescribed drugs and medicines, e-ayurveda, etc. The digital communication channels for drugs and healthcare products in India must also be in strict conformity with Indian laws.

Even the website companies that are designing, uploading and managing these websites are vulnerable to many legal risks. The legal issues of e-commerce in India are also required to be complied with e-ayurveda entrepreneurs in India. In fact, the online pharmacies websites of India are already under regulatory scanner of Indian government.

Ayurveda practitioners, clinics and companies are Internet intermediaries within the meaning of Information Technology Act, 2000 and they are also required to comply with cyber law due diligence requirements (PDF) in India.

Perry4Law recommends that it would be a good strategy to comply with techno legal requirements as are meant for e-ayurveda websites in India as instances of prosecution of e-commerce website owners for violation of India laws are in abundance in India.

Twitter Is Exploring Using Its Platform For E-Commerce Purposes

Twitter Is Exploring Using Its Platform For E-Commerce PurposesIf a company or individual owns a world renowned and highly accessible platform, it opens many business and commercial options for it/him. For instance, a blog or website having good viewers would also have good Google page rank and Alexa rank. Such blog/website would also have good online advertisement rates and revenues. Such blog/website would also have world wide reach and audience that every potential business would like to approach.

Social media platforms like Facebook, Twitter, Linkedin, etc and other similar highly reputed and famous websites have the advantage of reaching millions of potential customers immediately and instantaneously. This is the reason why they are frequently approached by numerous companies for alliances and partnerships.

These websites have also realised the potential and profitability aspects of e-commerce ventures. They have been trying different business strategies to explore e-commerce fields. The latest to join this wagon band is Twitter. According to media reports, Twitter is exploring ways to sell products directly from its platform.  It is also in the process of integrating a secure payment mechanism within its platform so that purchases can be made directly from the website/tweets.

While technological challenges can be managed by Twitter with some efforts yet legal issues would still haunt it. Twitter is a cyberspace product and model and conflict of laws in cyberspace would be a big challenge for it. For instance, if Twitter wishes to extend the proposed e-commerce services to India, it has to comply with legal issues of e-commerce in India. Trans border taxation issues are also required to be keep in mind by Twitter. The liability of Twitter for Indian income tax would also arise in future as the corporate and legal environment is fast changing in India.

The risk management and compliance issues would also arise for Twitter in India. For instance, e-commerce companies and websites are required to comply with many Indian laws including the Information Technology Act, 2000. They cannot avoid their liability in India for too long. Google’s Online Defamation Case is a good pointer in this regard and if Twitter is serious in exploring Indian market, it cannot ignore compliance with Indian laws.

It is too early for Twitter to comment anything upon these developments. But there is nothing better than formulating a techno legal strategy by Twitter for its Indian operations well in advance to avoid any legal problems.

Indian Tax Liability Of Google, Facebook, Twitter, Etc For Online Business And E-Commerce

Indian Tax Liability Of Google, Facebook, Twitter, Etc For Online Business And E-CommerceConflicts of laws have been posing difficulties for long. They have been used to escape legal obligations and liabilities in many cases. Countries around the world have entered into unilateral and bilateral agreements and treaties to minimise the impact of conflict of laws to their local jurisdictions. However, information and communication technology (ICT) has added a very complex and complicated layer to this conflict of laws problem.

Conflict of laws in cyberspace is the technology version of its traditional counterpart. Newer business models like e-commerce, online businesses, online consultancies, online advertisement, etc have bypassed all the traditional safeguards to make the companies and individuals liable for laws of various jurisdictions. The tax heavens have added another significant problem to this scenario.

Many foreign technology companies have been doing online businesses through their parent company established in foreign jurisdictions while having a subsidiary company in India. This way they are trying to bypass the local laws of various jurisdictions, including India. Unfortunately, Indian government is supporting these foreign technology companies in their tax evading and law braking activities.

A crucial question that is making rounds these days is Google liable to pay taxes in India? This is a very crucial case for Indian taxation jurisprudence having multi jurisdiction aspects. Similarly, the Google’s online defamation case is testing the significance and applicability of Indian laws to online businesses breaking Indian laws with impunity. The legal issues of e-commerce in India are not adhered to by national and international e-commerce companies.

Foreign companies like Google, Facebook, Twitter, etc are Internet intermediaries within the meaning of Information Technology Act, 2000 and they are also required to comply with cyber law due diligence requirements (PDF) in India for having strong virtual and physical contacts in India. Even advertisement revenue is also earned by these companies from Indian activities and targeting Indian residents.

We at Perry4Law believe that all Subsidiary/Joint Ventures Companies in India, especially those dealing in Information Technology and Online Environment, must mandatorily establish a server in India. Otherwise, such Companies and their Websites should not be allowed to operate in India. The Ministry of Home Affairs, India and Intelligence Bureau (IB) are already exploring this possibility.

A “Stringent Liability” for Indian Subsidiaries dealing in Information Technology and Online Environment must be established by Laws of India. More stringent online advertisement and e-commerce provisions must be formulated for Indian Subsidiary Companies and their Parent Websites.