A STUDY ON IMPACT OF E-MARKETING ON CONSUMER

i
 CERTIFICATE

This is to certify that Name is submitting her dissertation entitled “A STUDY ON IMPACT
OF E-MARKETING ON CONSUMER” for the award of the Degree of Master of Law
(LL.M) to the COLLEGE/UNIVERSITY NAME and has worked under my guidance and
supervision. The present study is a result of his genuine and bonafied research on the subject.
He has carried out of this work carefully, diligently and sincerely. As the work is complete
and he fulfills the requirements for the submission of the dissertation. It is hereby
recommended that it may be accepted for evaluation by the university.

Dr. ………………

College/University Name

ii
 DECLARATION

I hereby declare that the Dissertation titled “A STUDY ON IMPACT OF E-MARKETING

ON CONSUMER” is submitted by Name, a student of LL.M Final Year) in the partial
fulfillment of requirements for the award of the degree of Master of Law (LL.M) is based on
my original research work and this work has been done under the supervision and guidance
of Dr. …………., University Name.

PLACE- Delhi Name

DATE- LL.M (Final year)

Reg. No. ………..

iii
 ACKNOWLEDGMENT

I am thankful to FACULTY OF LAW, UNIVERSITY NAME for providing me an

opportunity to write a dissertation and providing me with the appropriate guidance and
material to convert my ideas into this dissertation.

I am fortunate to be provided with an opportunity to write my dissertation under the kind

supervision of Dr. ……., FACULTY OF LAW, COLLEGE/UNIVERSITY NAME This
dissertation would not have been possible without her valuable inputs, honest remarks and
earnest efforts and support to guide me throughout the drafting of the dissertation. I would
like to extend my sincere gratitude to her for giving me her valuable time to view my
research.

I would like to thank my family, whose life-long love and support, encouragement, patience,
and belief in me ultimately made this dissertation possible. I owe my loving and caring
parents who always stood by me to recognize my potential. Their silent prayers, aesthetic
love, and affection, support, and steel belief in my capabilities have enabled me to make this
endeavor a successful one.

I would like to extend my sincere thanks to my friends and seniors for their review and
honest remarks given to me regarding the dissertation.

Above all, I sincerely acknowledge my gratitude to almighty God for his compassion and his
bountiful blessings to complete this venture.

Working on the dissertation has been one of the most enriching experiences for me and has
resulted in amassment of the bulk of highly relevant and functional information.

Dated: Name

iv
 LIST OF CONTENT

Title Page i
Certificate ii
Declaration iii
Acknowledgement iv
List of abbreviations viii
List of cases ix

CHAPTER 1
INTRODUCTION 1-15
1. Introduction 1
1.1 Consumer Protection (E-Commerce) Rules, 2020 2
1.2 E-Commerce 3
1.3 Kinds of E-Marketing 4
1.4 Modes of E-Marketing 5
1.5 E-Marketing Trends in India 7
1.6 Liabilities 8
1.7 Marketplace e-commerce entities (Rule 5) 11
1.8 Inventory E-Commerce Entity (Rule 7) 11
2. Statement of problem 12
3. Research Objectives 12
4. Research questions 13
5. Review of Literature 13
6. Hypothesis 14
7. Research Methodology 14
8. Tentative chapterization 15

CHAPTER 2
HISTORICAL BACKGROUND OF E-MARKETING 16-38
2.1 Introduction 16
2.2 Meaning of E-commerce 16
2.2.1 Various application of E-commerce 17
2.2.2 Types of e-commerce 21
2.3 E-contract 26
2.3.1 Types of Electronic Contracts 27
2.3.2 Procedures available for forming electronic contracts 29
2.3.3 Time of formation of contract 32
2.3.4 Doctrine Privity of contract 36
2.3.5 Third Party Beneficiary 36
2.3.6 Intended beneficiary 37
2.4 Conclusion 37

CHAPTER 3
CONSUMER ISSUE RELATING TO E-MARKETING 39-54
3.1 Introduction 39
3.2 Legislation on E-commerce in India
3.2.1 Information Technology Act, 2000 40
3.2.2 Information Technology (Amendment) Act, 2008 41

v
3.3 Legal Issues and Challenges of E-commerce 42
3.3.1 Issues of Validity of the E-Contracts 42
3.3.2 Issues of Jurisdiction in Disputes 43
3.3.3 Issues Relating to Privacy 44
3.3.4 Issues of Intellectual Property Rights 45
3.4 Identity Theft and Impersonation 46
3.5 Privacy 46
3.6 Data Protection 47
3.7 Kinds of Information covered under the Data Protection Rules 49
3.7.1 Potential Liability under the Data Protection Rules 50
3.8 Security of Systems 50
3.9 Efficient delivery system 50
3.10 Advertising 51
3.11 Competition 52
3.12 Conclusion 52

CHAPTER 4
AMENDMENTS IN INFORMATION TECHNOLOGY ACT
TOWARDS E-MARKETING AND ISSUES RELATING
TO THE CONSUMERS 55-61
4.1 Introduction 55
4.2 Provisions 55
4.2.1 Applicability 55
4.3 E-Commerce Entity Requirements 56
4.4 Marketplace E-Commerce Entity 58
4.5 Sellers on the Marketplace 59
4.6 Inventory E-Commerce Entity 60
4.7 Conclusion 60

CHAPTER 5
JUDICIAL TRENDS TOWARDS E-MARKETING IN INDIA 62-93
5.1 Introduction 62
5.2 Legal validity of E-transaction 63
5.3 E-Commerce Dispute 64
5.3.1 Types of E-commerce Dispute 65
5.3.2 Contractual disputes 65
5.3.3 Disputes between the enterprise and the Internet Service Provider (ISP) 65
5.3.4 Non-contractual disputes 66
5.3.5 Jurisdiction over E-Commerce Disputes 67
5.3.6 Basis of Jurisdiction under Indian Law 67
5.3.7 Indian Statutes and E-commerce Jurisdiction 67
5.4 Information Technology Act, 2000 vis-à-vis E-Commerce 68
5.5 The Indian Penal Code, 1908 69
5.6 The Civil Procedure Code, 1908 70
5.7 E-Commerce cases in India 72
5.8.1 Clickwrap 74
5.8.2 Adoption of specific rules for E-contracting 75
5.8.3 Applicability of intermediary regulations under the IT Act 77
5.9 Problems with E-Contract 82
5.9.1 Jurisdictional Issues 83

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5.9.2 Minors Entering Into a Contract 84
5.9.3 Standard Form of Contracts 84
5.9.4 Sectoral Issues:
5.9.4.1 Issues of E-Commerce in Competition Law 85
5.10 Constitutional Issues
5.10.1 Legality of Government Tenders and E-Contracts 86
5.10.2 E-Arbitration and E-Contracts 88
5.11 Challenges of E contracting in cyberspace 90
5.11.1 Inherent Challenges 91
5.11.2 Legal Challenges 91
5.11.3 Statutory effect 93
5.12 Conclusion 93

CHAPTER 6
CONCLUSION AND SUGGESTIONS 94-100

BIBLIOGRAPHY 101

vii
 LIST OF ABBREVIATIONS

& And
AC Appeal Cases
AIR All India Reporter
All. E.R. All England Law Reports
AWC Allahabad Weekly Case
Cal. Calcutta
CBI Central Bureau of Investigation
CCR Current Criminal Reports
Civil CC Civil Court Cases
CLA Corporate Law Adviser
CPJ Consumer Protection Judgments
Cri LJ Criminal Law Journal
CTLJ Contracts and Traders Law Journal
CTLR Computer and Telecommunication Law Review
Del. Delhi
DLT Delhi Law Times
DRJ Delhi Reported Journal
e-Commerce Electronic Commerce
e-Contract Electronic contract
ER England Reports
ILR Indian Law Reports
In U.S. case Cal. California Cases
Inc. Incorporation
IT Information Technology
JCM Journal of Computation and Mathematics
JT Judgment Today
Ltd. Limited
Mag. Magazine
N.C.T. National Capital Territory of Delhi
NJ New Jersey Courts
No. Number
p. page
PTC Patents and Trade Mark Cases
pp. pages
Pvt. Private
Rptr. Reporter
SC Supreme Court
SCC Supreme Court Cases
SCJ Supreme Court Journal
SCR Supreme Court Reporter
Sec. Section
ITA The Information Technology Act, 2000 (2008)
U.S. United States Supreme Court
Vol. Volume
Vols. Volumes
vs. Versus

viii
 LIST OF CASES

1. Trimex International FZE Ltd. Dubai v. Vedanta Aluminum Ltd., 2010 (1) SCALE 574
2. Kharak Singh v State of UP, AIR 1963 SC 1295
3. People’s Union of Civil Liberties v. the Union of India, 1997 (1) SCC 318
4. Consim Info Pvt. Ltd v. Google India Pvt. Ltd., 2013 (54) PTC 578 (Mad)
5. K.S Puttaswamy vs. UOI, (2017) 10 SCC 1
6. Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas and Co., AIR 1966 SC
543
7. Entores Ltd v. Miles Far East Corporation, [1955] 2 QB 327
8. SMC Pneumatics (India) Pvt. Ltd. v. Jogesh Kwatra, Suit No. 1279/2001
9. Nehring v. S.S. M/V Point Vail, 901 F.2d 1044 (11th Cir. Fla. 1990)
10. Modi Entertainment Network and anr v. W.S.G. Cricket Pvt. Ltd., AIR 2003 SC 1177
11. Casio India Co. Ltd V. Ashita Tele Systems Pvt Ltd., 2003 27 PTC 265 Delhi
12. India TV Independent News Service Ptv Ltd V. India Broadcast Live LLC, 2007 35
PTC 177 Delhi
13. National Association of Software and Service Companies vs. Ajay Sood & Others, 119
(2005) DLT 596, 2005 (30) PTC 437 Del
14. SMC Pneumatics (India) Private Limited v. Jogesh Kwatra, Suit No. 1279/2001
15. Syed Asifuddin & Ors V State of Andhra Pradesh & another, 2005 CrLJ4314 (AP)
16. Casio India Co. Limited v. Ashita Tele Systems Pvt. Limited, 2003 (27) P.T.C. 265
(Del.) (India),
17. Rediff Communication Ltd. v. Cyber Booth, A.I.R. 2000 Bom 27 (India)
18. Dow Jones & Co. Inc. v. Gutnick, 9 (2002) H.C.A. 56 (Austl.)
19. Banyan Tree Holding (P) Limited v. A. Murali Krishna Reddy, 2 CS (OS) 894/2008
(High Court of Delhi, 23rd November 2009) (India)
20. Rudder v. Microsoft Corporation, [1999] OJ No 3778 (Sup Ct J)
21. Societe Des Products Nestle S.A and Anr v. Essar Industries and Ors., 2006 (33) PTC
469 Del.
22. Amazon Seller Services Pvt. Ltd. v. Amway India Enterprises Pvt. Ltd., (2020) 267
DLT 228 (DB)
23. Rediff. com India Ltd. v/s Urmil Munjal, 2013(3) CLT 79 (NC)
24. Rajinder Singh Chawla v. makemytrip.com, FA No 355/2013, SCDRC, Chandigarh
25. Marwar Engineering College and Research Centre v. Hanwant Singh, IV (2014) CPJ
582 (NC)
26. M/s Afcons Infra Ltd. v. M/s Cherian Varkey Construction Company Ltd. and Other,
(2010) 8 SCC 24
27. Anita Kushwaha v. Pushap Suda, (2016) 8 SCC 509
28. P.R. Transport Agency v. UOI, AIR 2006 All 23, 2006 (1) AWC 504
29. Mohori Bibee vs. DharmodasGhose, (1918) ILR 40 All 325
30. L.I.C India v. Consumer Education and Research Centre, 1995 AIR 181
31. Maneka Gandhi v UOI, AIR 1978 SC 597
32. EP Royappa v State of Tamil Nadu, AIR 1974 SC 555
33. A.K.Gopalan v State of Madras, AIR 1950 SC 27
34. National Textiles Workers Union V. P.R.Ramkrishnan, AIR 1983 SC 750
35. OligaTellis v. Bombay Municipal Corporation and others, AIR 1986 SC 180
36. Corlie Mullin v. Adminstrator and Union Territory of Delhi, AIR 1981 SC 746
37. Mohini Jain V. State of Karnataka, AIR 1992 SC 1858
38. Unni Krishnan v State of Andhra Pradesh, AIR 1993 SC 21

ix
 CHAPTER 1

INTRODUCTION

1. Introduction

The raging Covid-19 pandemic across the globe has forced individuals and governments alike
to resort to measures of an unprecedented nature. The mandatory social distancing norms and
a general inclination towards a contact-free approach has resultantly led to a significant rise
in the popularity of platforms especially with the introduction of Unlock 3.0 measures.1

The modern consumer, who is continuously educated and knows how to use the power of the
online communication, has different requirements and expectations from the companies. The
availability, accuracy, experiences of previous users, speed of delivery, information about
discounts and special offers are only part of the information that helps consumers to select a
specific product. And since in this online era customers with a single click can “go” from
company to company and buy a product, it is recommended the marketing departments of
companies to be original, creative and undergoing constant change, in order to keep the
attention of modern consumers (e-consumer). Electronic marketing provides more modern
marketing methods to the companies, which include: search engine marketing, which
includes search engine optimization and pay per click advertising; e-mail marketing; affiliate
marketing; banner ads that appear on web sites; video ads that are available online, or video
marketing; social media marketing, in which the most evident is Facebook marketing, due to
its widest consumer coverage, and also Twitter marketing; modern viral marketing and
mobile marketing. All these methods offer a series of advantages to companies, if they are
successfully applied in the brand creation, which can significantly influence the improvement
of company’s work.

The Market Study on E-Commerce published by the Competition Commission of India

("CCI")2 in January 2020 highlighted the upward trend in the revenue growth of the sector
from USD 39 billion in 2017 to USD 120 billion in 2020, making India one of the fastest
growing e-commerce market spaces in the world. While the sector has been growing at an

1
“The Ministry of Home Affairs Order dated 29 July 2020 has allowed all essential activities (barring a few) in
areas outside containment zones.”
2
“Competition Commission of India, Market Study on E-Commerce in India (08 January, 2020)”

1
increasingly steady pace, the present pandemic and the consequent repercussions including
the general fear of the virus (given the ever-rising numbers of Covid-19 cases) has
contributed towards bolstering the growth of e-commerce platforms over physical markets.

In light of the above, consumer protection and the need to introduce appropriate laws to
ensure consumer protection in the digital commerce space has never been more crucial.
Accordingly, the Central Government under Section 101(2)(zg) (Power of Central
Government to make rules) of the Consumer Protection Act, 2019 ("CPA 2019"), 3 the
Ministry of Consumer Affairs, Food and Public Distributions notified the Consumer
Protection (E-Commerce) Rules, 2020 ("Rules") on 23 July 2020.4

1.1 Consumer Protection (E-Commerce) Rules, 2020

The Rules (Rule 2) apply to: (a) all goods and services (including digital products 5)
transacted over an electronic/digital network; (b) all models of e-commerce, including
marketplace and inventory models (discussed below); (c) all e-commerce retail (including
multi-brand and single brand retail trading); and (d) all forms of unfair trade practices across
all e-commerce models.

While, the Rules have been expressly made applicable to e-commerce entities, the Rules do
not apply to a natural person where the following components are met: (a) the activities are
being undertaken in a personal capacity; and (b) the activities do not form part of any
professional or commercial activity being undertaken on a regular or systematic basis. Put in
simple terms, where an individual is engaging in a transaction either in a personal capacity
and not in a regular or systematic basis for any professional or commercial activity (for
instance, selling a used book online other than through an e-commerce entity), would not fall
within the purview of the Rules. Accordingly, natural persons engaged in occasional
transactions entailing consumer to consumer or business to consumer interface may be
excluded.

3
“The Consumer Protection Act, 1986 has been replaced with the CPA 2019. The new legislation came into
force on July 20, 2020.”
4
“A preliminary draft of the Rules was released in November 2019, wherein consultation from various
stakeholders had been invited by December 2019. The 2019 draft of the Rules was preceded by the E-
Commerce Guidelines for Consumer Protection, 2019. The present version of the Rules comprises an upgraded
version of the 2019 draft rules which replaces the E-Commerce Guidelines for Consumer Protection, 2019.”
5
“E.g. E-Books, Music and Movies available over the internet, etc.”

2
E-commerce has become a busting business in India today. It is the cutting edge in all areas
of business today. As early as 2014, Internet and Mobile Association of India (IAMAI) had
come up with a report that IAMAI has estimated that nearly 1 million large and small
retailers make use of online marketplaces to reach out to their customers. These online
retailers represent a very wide range of categories including electronics, books, apparel,
accessories, footwear, jewelry, etc.

The need to ensure basic rights to consumer welfare has long been recognized by legislations
world over and so with India. On lines with the United Nations Guidelines on Consumer
Protection (UNGCP), India enacted the Consumer Protection Act in 1986 to protect
consumer interests. The popularity of the enactment lies in its avowed objectives of
identifying consumer rights and providing cost-effective and speedy redressal. Though there
are no specific laws governing e-commerce in India, in terms of Business-to-Consumer E-
commerce, the existing provisions of Consumer Protection Act, 1986, is being applied to
disputes in online transactions mostly under the provisions of ‘Deficiency in Service’ under
Section 2(1)(g) of the Consumer Protection Act, 1986 or ‘Unfair Trade Practices’ under
Section 2(1)(r ) of the Consumer Protection Act, 1986.

1.2 E-Commerce

Electronic commerce platforms allow for Internet-enabled trade in unprecedented ways. With
its ubiquitous reach, the architecture of electronic commerce provides a dynamic and
collaborative platform to business and consumers. Consumers get to choose from a whole
range of goods and services across the world, from anywhere and at any time. Businesses are
constantly innovating new technologies in order to adapt to new and evolving challenges in
the area of e-commerce. One of the main drivers underlying e-commerce growth is the rise in
number of individuals using the Information and Communication Technology (ICT) as a
platform to trade.

Put simply, electronic commerce involves buying and selling of goods and services through
electronic means. Black’s Law Dictionary defines Electronic Commerce as “business
conducted without the exchange of paper based documents through the use of electronic
and/or online devices. It includes activities such as procurement, order entry, transaction
processing, payment, authentication and nonrepudiation, inventory control, order fulfillment,
and customer support. The general public participates in ecommerce, almost unknowingly

3
these days. Ecommerce devices include computers, telephones, fax machines, barcode
readers, credit cards, automated teller machines (ATM) or other electronic appliances,
whether or not using the internet.”

The WTO Work Programme on Electronic Commerce defined “electronic commerce” to

mean “the production, distribution, marketing, sale or delivery of goods and services by
electronic means”. The Committee further stated that “a commercial transaction can be
divided into three main stages: the advertising and searching stage, the ordering and payment
stage and the delivery stage. Any or all of these may be carried out electronically and may
therefore be covered by the concept of “electronic commerce”.6

The Model Law on Electronic Commerce (MLEC) was adopted by United Nations
Commission on International Trade Law (UNCITRAL) in 1999, to enable and facilitate
commerce conducted using electronic means by providing national legislators with a set of
internationally acceptable rules aimed at removing legal obstacles and increasing legal
predictability for electronic commerce. The fundamental principles of non-discrimination,
technological neutrality and functional equivalence adopted by the Model Law makes it
widely regarded as the founding elements of modern electronic commerce law.

Based on the UNCITRAL Model law, the Indian Information Technology Act, 2000,
provides legal recognition to transactions carried out by electronic means. The Act refers
‘electronic commerce’ to transactions carried out by means of electronic data interchange and
other means of electronic communication, which involve the use of alternatives to paper-
based methods of communication and storage of information.

1.3 Kinds of E-commerce

a. B2B – Business-To-Business – E-commerce has enabled businesses to partner with other

businesses for efficiently managing their business functions. Here businesses commonly
use the Internet to integrate the value added chain that can extend from the supplier of raw
materials to the final consumer. Indiamart.com is one such B2B online market place
which provides a platform for businesses to find other competitive suppliers.

b. B2C - Business-To-Consumer – In a Business to Consumer (B2C) transaction, the

distribution channel typically starts with manufacturer and goes through a distributor/
6
“World Trade Organisation, “Declaration on Global Electronic Commerce”, (1998), available at
http://r0.unctad.org/ecommerce/event_docs/colombo_wto.pdf,”

4
 wholesaler to retailer, who interacts with the end customer. The B2C ecommerce model is
not only cost effective in terms of investment to the seller, but also provides consumer
with products at discounted price.

c. C2C – Consumer-To-Consumer – Here individuals use Internet, social media and

mobile phones as means to sell goods and services, either through their personal websites,
email, auction sites, text messages through mobile phones and sites providing classified
advertising services. For example, portals such as eBay, OLX and Quikr enable
consumers to transact with other consumers.

d. B2B2C – Business to Business to Consumer or Intermediary Model – An extended

B2C model commonly used in ecommerce is the B2B2C model or the Intermediary
Selling model. Here, an additional intermediary business assists the first business to
transact with the end consumer. This model is cost-effective to the manufacturer, who can
reach his goods/services to distant locations through the marketplace model. For instance,
Flipkart, one the most successful e-commerce portals provides a platform for consumers
to purchase a wide variety of goods such as books, music, clothing and electronic goods.
The growth of this model is evident from the surge in the number of e-commerce players
adopting this model in recent times – Amazon, Jabong, Snapdeal to name a few. These
online platforms tie up with payment gateway facilitators who provide a platform for the
processing of payments or simply provide for cash on delivery option, where the buyer
pays for the goods on delivery.

1.4 Modes of E-marketing

Teleshopping:

Advertisements extolling the virtues of body slimming gadgets, magical skin creams and
cleaning equipment with extensive demos on the television is a common phenomenon today.
There are channels such as telebrands and homeshop18, which are exclusively dedicated to
telemarketing. Teleshopping also comprise of slots on channels of different sorts spanning
entertainment, news etc. These advertisements generally flash toll free lines to enable
consumers to place their order, while offering easy payment options. The price and code
number (if any) of the products and the telephone number of the sellers are also displayed on
the screen. A significant characteristic of using teleshopping is that a business that operates

5
from a single location can reach large numbers of potential customers who are geographically
widely spread.

Telemarketing:

Telemarketing is a method of selling goods or services using telecommunication devices such

as Mobile phones, landlines, satellite phones and voice over Internet protocol (VoIP). It can
be done from the seller’s place of business or from a call centre or even from home. It is a
form of distance selling where the business can reach far and wide without much effort and
expense. For instance, while the mother company is in UK, the call centre is located in India.
The consumer will get a call from India about a product, which is in UK. It is important in
such forms of distance selling, that the telemarketer should make adequate and proper
disclosure of the goods or services to the customers.

Internet Shopping:

Internet shopping or commonly called online shopping is now one of the most convenient and
quick modes of e-commerce to which consumers have adopted. Here the consumer browses
the online catalogue on the product or service he desires to purchase and places an order.
Payment is made by using some safe online payment modes. On receiving the order, the
supplier or seller delivers the goods at the consumer’s place through postal service or courier.
Thus, internet shopping enables one to visit a world market, make best choice of goods at
competitive prices by just a click of button.

Mobile commerce:

Mobile commerce (m-commerce) has also created immense platform for e-commerce
transactions today. The phrase mobile commerce was originally coined in 1997 to mean “the
delivery of electronic commerce capabilities directly into the consumer’s hand, anywhere, via
wireless technology.” Mobile money transfers to mobile ATMs, mobile ticketing, mobile
vouchers and coupons, sale of ring-tones, wallpapers, and games for mobile phones,
information such as news, stock market etc. are some of the common transactions for which
mobile commerce is extensively used. Likewise, with several online shopping portals
providing mobile applications for purchase of goods and services, mobile commerce has been
the most convenient mode for a consumer to purchase goods and services, without even using
a computer or laptop.

6
Social media shopping:

Social media commerce is a subset of electronic commerce that involves use of social media
such as Facebook, Twitter and YouTube in the context of e-commerce transactions. Social
media commerce is on the rise as it supports social interaction, and user contributions to
assist in online buying and selling of products and services. It includes customer ratings and
reviews, user recommendations and referrals that attract consumers to the platform.

1.5 E-marketing Trends in India

E-business has indeed emerged as a major opportunity for India. With the phenomenal spread
of mobile telephony and the advent of 3G in the country, buyers from small towns and cities
are also buying online in large numbers. It is a fact that internet has dissolved the
discrimination factor between the small and the big cities enabling buyers from small towns
to have access to the same branded goods, and quality products which earlier was a privilege
of large city buyers.7

Internet is a bustling industry connecting to more than 2 billion people worldwide. In the
context of the Indian internet landscape, a December 2012 McKinsey report offers seven key
findings concerning the impact of and outlook for Internet in India. According to the report,
India’s base of about 120 million Internet users is currently the third-largest in the world.
India is likely to have the second-largest user base in the world, and the largest in terms of
incremental growth, with 330 million to 3.2 billion Internet users in 2019. The report also
shows that India has the potential to double its economic contribution from the Internet in the
next three years, from 1.6 percent of GDP at present to 2.8 to 3.3 percent by 2018.8

Further, the Rules have extra-territorial application on those e-commerce entities which may
not be established in India, but systematically offers goods and services to consumers in India
(Rule 2(2)).

1.6 Liabilities

7
“Maitra Dilip, E-commerce is a new dream for India Inc., Deccan Herald, (10/07/2013)
http://www.deccanherald.com/content/210955/e-commerce-dream-india-inc.html%20 on dated 09.06.2019”
8
“Gnanasambandam Chandra, Madgavkar Anu et al, Online and Upcoming: The Internet’s Impact on India,
(December 2012), p.1, available at https://www.google.co.in/?gfe_rd=cr&ei=-
ad1Vca7MsKM8QeF74GYCw#q=Gnanasambandam+Chandra%2C+Madgavkar+Anu+et.+Al.%2C+
%E2%80%9COnline+and+Upcoming:+The+Internet%E2%80%99s+Impact+on+India%2C
%E2%80%9D+December+2012%2C+www.mckinsey. com, on dated 12.06.2019”

7
E-commerce entities (Rule 4)

Legal structure: An e-commerce entity must either be incorporated under the (Indian)
Companies Act, 2013 (or its predecessor Companies Act, 1956) or a foreign company or an
office, branch or an agency outside India owned or controlled by a person resident in India.

Implications: The Rules curiously have not included other legal structures such as limited
liability partnerships. This exclusion will impact several e-commerce entities which are
operating under a different legal structure. Section 107(2) (Repeal & Savings) of the CPA
2019 provides for grandfathering of previous actions unless such previous actions are
inconsistent with the provisions of the CPA 2019. Accordingly, it appears that an existing e-
commerce entity may need to change its legal structure to a company. While this may not be
the legislative intent, a similar provision exists in Foreign Exchange Management (Non-debt
Instruments) Rules, 2019 ("NDI Rules").

The Rules do not require mandatory physical/entity localisation as is being misunderstood

largely. As per Section 2(42) of the Companies Act 2013,9 a foreign company may have a
place of business in India through electronic mode for conducting a business activity in India.

From a joint reading of provisions pertaining to e-commerce entity under the Rules and the
identical definitions of 'electronic mode'10 and 'business activity'11 it is clear that foreign e-
commerce companies may operate virtually without the need to have a physical presence in
India. This reading also compliments the fact that the Rules have extra-territorial application
on entities not established in India but are engaged in systematically offering goods and
services to consumers in India.

Also, the Rules contain reference to Section 2(v)(iii) of Foreign Exchange Management Act,
1999 with regard to 'office, branch or an agency outside India owned or controlled by a
person resident in India' which appears to be an inadvertent error and the reference ought to
have been made to Section 2(v)(iv) instead.

Nodal officer: Appoint a nodal person of contact or a senior designated functionary who is
resident in India, for ensuring compliance with the CPA 2019 and the Rules.

9
“CPA 2019, S. 2(37) defines 'product seller'.”
10
“Marketplace entities with foreign investment will also need to comply with the draft E-Commerce Policy as
and when published / implemented by the Department for Promotion of Industry and Internal Trade.”
11
Department for Promotion of Industry and Internal Trade.”

8
Implications: This will require an e-commerce entity based outside India to appoint a
person /individual resident in India to ensure compliance with the Rules and the CPA 2019
even though such entity may not have an office / place of business in India. Also, a start-up
company in its early stages will now need to incur additional expenses to engage a full-time
personnel in this regard.

Grievance redressal: Establish an adequate grievance redressal mechanism and appoint a

grievance officer whose name, contact details and designation is displayed on the consumer
facing platform. Further, it is now mandatory to acknowledge the receipt of any consumer
complaint within 48 hours and provide redressal of the same within 1 (one) month from the
date of receipt of the complaint.

Implications: The requirement to appoint a grievance officer was already covered under
Rule 5(9) the Information Technology (Reasonable security practices and procedures and
sensitive personal data or information) Rules, 2011 ("SPDI Rules") and Rule 3(11) of the
Information Technology (Intermediaries guidelines) Rules, 2011 ("Intermediary Rules").
While the roles of the officer and applicability of the SPDI Rules and Intermediary Rules are
different, the Rules have made the application universal to all e-commerce entities.
Nonetheless, this increases the compliance burden of early stage start-ups.

Further, from the consumer perspective this will provide a time-bound redressal of
grievances. Mandating acknowledgment of complaints is another step forward towards
ensuring transparency in the mechanism.

Information display: The e-commerce entity should, in a clear and accessible manner
display: (a) its legal name; (b) addresses of its office(s); (c) details of the website; and (d)
contact details of customer care and grievance officer. In case of imported goods, the e-
commerce entity should display the name and details of the importer or the seller (as the case
may be).

Implications: In addition to privacy policy, terms of use, customer agreements (if required)
and other rules and regulations as specified under the SPDI Rules and the Intermediary Rules,
the e-commerce entity will also need to disclose the aforesaid information.

Anti-market practices: E-commerce entities are prohibited from: (a) adopting any unfair
trade practices; (b) quoting unjustified prices, having regard to prevailing market conditions,

9
essential nature of goods and services, extraordinary circumstances in which goods and
services are offered and any other relevant considerations, in order to gain unreasonable
profit; and (c) discriminating between consumers of the same class or making arbitrary
classifications between consumers.

Implications: The Rules are silent on discriminatory practices of e-commerce entities vis-à-
vis sellers especially in a B2B context where goods and services are being transacted for
earning a livelihood. Prevalence of unfair contract terms was noted in the report dated 8
January 2020 of the CCI titled 'Market Study on e- Commerce in India – Key Findings and
Observations'.

Further, terms like 'unjustified prices', 'unreasonable profits' and 'arbitrary classification'
remain undefined and are likely to cause conflict, confusion and mis-use at the hands of
litigious consumers. For instance, restricting access to (a) sale / discounts on
products/services; or (b) new movies to a particular set of subscribers / consumers may
amount to arbitrary classification since these affect the rights of the consumers.

Other duties: The e-commerce entities: (a) cannot impose cancellation charges on
consumers unless similar charge is required to be borne by it; (b) must obtain explicit and
affirmative consent from consumers for executing the purchase but not through automatic
means such as pre-ticked checkboxes; (c) effect refund within a reasonable period of time as
per guidelines of the Reserve Bank of India.

Implications: While all such compliances may have the effect of providing a safe and secure
experience for consumers in the digital marketspace, it is also important to weigh these
against the financial burden that would be imposed on small or mid-size e-commerce entities.
It is significant to note that not all e-commerce entities constitute a multi-billion dollar
business, quite a significant portion of the digital marketplace also comprises of small scale
start-ups. Such start-ups may not possess the requisite funds to ensure compliance.
Accordingly, certain concessions may be a welcome change for early stage start-ups

1.7 Marketplace e-commerce entities (Rule 5)

In addition to the compliances set out in the Intermediary Rules, the marketplace e-commerce
entities is required to need to comply with the following provisions in order to avail the safe
harbour exemption under Section 79(1) of the Information Technology Act, 2000 ("IT Act"):

10
Records: To maintain a record identifying sellers who repeatedly have offered goods or
services that have been removed or access to which has been disabled under Copyright Act,
1957, Trade Marks Act, 1999 or the IT Act. The marketplace e-commerce entity may at its
discretion terminate access of such sellers to its platform.

Sellers (Rule 6)

Fake reviews: Sellers are prohibited from posting reviews posing as a customer on the offered
goods / services.

Duty to take back: Sellers are obligated to take back goods or withdraw services and refund
consideration if such goods and services are defective, deficient, late delivered (unless due to
force majeure), different from the features advertised or spurious.

Implications: The Rules do not expressly cover this but the term 'reviews' should also include
grading / ranking of products. Further, the obligation of the sellers to take back / withdraw
has paved way for a new right to return / refund for the consumers, which was previously
absent under the Consumer Protection Act, 1986.

The Legal Metrology (Packaged Commodities) Rules, 2011 ("LM Rules") which applies to
labelling of products also mandates every imported product to mention relevant information
pertaining to the country of origin or manufacturer or assembly on the package.15 However,
in line with the vision of Atmanirbhar Bharat, the sellers are required to disclose such
information and notices as required under applicable law (which will include LM Rules).

1.8 Inventory E-Commerce Entity (Rule 7)

Since an inventory e-commerce entity owns the inventory (i.e. goods or services) and sells it
on its platform, it has been subjected to similar obligations as that of a marketplace e-
commerce entity and sellers pertaining to display requirements, fake reviews, products should
be as advertised, obligations to take back or withdraw.

Additionally, an inventory e-commerce entity which vouches for the authenticity of the goods
or services sold by it will be subject to appropriate liability in case of any action pertaining to
the authenticity of such goods or services.

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Implications: An inventory e-commerce entity will need to undertake caution in terms of the
representations it makes towards the goods/services being offered. Adequate diligence will be
required along with standard carve-outs in the terms of use and other conditions in order to
limit their liability.

Non-compliance

Any non-compliance of the Rules will result in penalty as specified under the Act. While in
certain cases (misleading advertisement, non-compliance of orders of Central Authority,
injury / death of consumer) imprisonment ranging between 1 month to life (depending on the
offense) has been prescribed and in other cases fine which range from INR 25 thousand to
INR 5 million.

2. Statement of problem

Indian entrepreneurs and foreign MNCs are forging various e-commerce ventures. Being at
very nascent stage, less number of e-commerce players are actually knowing and complying
with techno-legal requirements. Understanding the fact that proliferation of new technologies
like e-commerce require solid legal framework, the Indian government made an attempt to
address number of issues and legislated the IT Act as a mixture of too many provisions. As a
result, several provisions which are essential for development of e-commerce environment
are incomplete or unaddressed. These include issues related to legal validity of e-transactions,
security, junk mail and spamming, content regulation, intellectual property, payment, taxation
of e-commerce transactions, intermediary liability, jurisdiction and consumer protection.

3. Research Objectives

1. To understand how the e-marketing is working.

2. To analyse the existing traditional laws and specific laws relating to electronic
marketing.

3. To find lacunas in the existing laws with respect to the security aspects and usage in
the area of e-commerce.

4. Suggest ways to legally address the existing issues/requirements in order to bridge the
gap between law and technological development.

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4. Research questions

1. Whether e-commerce transactions need to treated separately with separate laws

governing them?

2. Are there lacunas in current laws governing e-commerce (in relation to products,
services and investments etc.)?

3. Whether present security systems are sufficient to protect consumers/parties and are
they on par with international standards?

4. Whether present methods for administration of laws and justice delivery effective or
is there a need for change?

5. Review of Literature

Mahipal, D., (2018) in his paper mentions different phases of internet from year 1995 to
present era. Further, the study concludes that there will be tremendous growth in coming
years provided there is security in legal framework and e-commerce so that domestic and
international trade could expand.

Kumar, N., (2018) in his report mentions tremendous growth in e-commerce is expected to
rise 4 times by year 2021 in comparison to 2015. Major contributors to this growth are going
to be smartphones and internet users, rise in awareness among general public, better internet
services, digitalization of most of the initiatives with the support of government, entry of
foreign investors and business players, advanced payment options available to consumers but
Government need to take steps to provide proper legal framework and minimize obstacles in
growth.

Khosla and Kumar (2017) in their analytical report mentioned that some of the trends
expected to come in near future in ecommerce can be growth in omni channels, niche
businesses, mergers and acuisitions, tapping more rural markets, rise in internet marketing,
focus on services, rise in digital payment modes, better infrastructure and supply chain
management.

Seth, A., Wadhawan, N., (2016) mentions that retailers are required to go beyond their
boundaries in order to get compatible with new digital business era. Digitalization is no more

13
a choice now, rather it has become a necessity for all retailers. This could include
transformation of business models, incorporating technological investments, getting tech-
savvy with new advancements.

Shahjee, R., (2016) states that e-commerce has given a platform to companies to display their
varied products and to make it easy for consumers to quicky find out products of their
interest, which was comparatively difficult by marketing traditionally. But on the contrary, e
commerce is facing lot of difficulties related to infrastructural capabilities and computer and
internet lack of knowledge among consumers, specially rural consumers.

Shettar, M., (2016) suggested that proper knowledge and understanding of legal framework
and possible issue and risk management is required for businesses these days. The growing e
commerce in India has attracted the attention of global players too. With the increase in
SMEs, FDI and MNCs more and more employment opportunies are granted to consumers,
thereby increasing their buying capacity.

6. Hypothesis

1. Existing laws are inadequate to meet the challenges faced towards e-marketing.

2. Recent amendment are adequate for addressing the issues pertaining to e-commerce.

7. Research Methodology

The researcher has adopted doctrinal method of research and the entire study is in the form of
analysis of the established procedures, thereby following analytical mode of research. The
primary sources for this study are the Information Technology amendment act 2020, E
Commerce Act 1998, Information Technology Bill 1999, IT (Amendment) Act 2008, Indian
Penal Code 1860, Banker’s Book Evidence Act 1891, Reserve Bank of India Act 1934,
Information Technology (Reasonable security practices and procedures and sensitive
personal data or information) Rules 2011, Indecent Representation of Women (Prohibition)
Act 1986, Information Technology (Intermediaries Guidelines) Rules 2011, Information
Technology (Intermediaries Guidelines) Rules 2011, and relevant judicial decisions.
Secondary sources include books, articles and web sources.

8. Tentative chapterization

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Chapter 1 : Introduction

Chapter 2 : Historical background of E-marketing

Chapter 3 : Consumer Issue relating to E-marketing

Chapter 4 : Amendments in Information Technology Act towards E-marketing and

issues relating to the consumers

Chapter 5 : Judicial trends towards E-marketing in India

Chapter 6 : Conclusion and Suggestions

CHAPTER 2

HISTORICAL BACKGROUND OF E-MARKETING

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2.1 Introduction

E-commerce is buying and selling goods and services over the Internet or doing business
online. Commerce is part of e-business. E-business is a structure that includes not only those
transactions that center on buying and selling goods and services to generate revenue, but
also those transactions that support revenue generation. These activities include generating
demand for goods and services, offering sales support and customer service, or facilitating
communications between business partners. Electronic commerce or e-commerce refers to a
wide range of online business activities for products and services. It also pertains to ‘any
form of business transaction in which the parties interact electronically rather than by
physical exchanges or direct physical contact.’

2.2 Meaning of E-commerce

E-commerce is the use of electronic communications and digital information processing

technology in business transactions to create, transform, and redefine relationships for value
creation between or among organizations, and between organizations and individuals.

E-commerce has been simply defined as conducting business on-line. The Organization for
Economic Cooperation and Development (OECD) defines electronic commerce as a new way
of conducting business, qualifying it as business occurring over networks which use non-
proprietary protocols that are established through an open standard setting process such as the
Internet. This definition distinguishes it from the earlier Electronic Data Interchange (EDI)
type proprietary based networks or Intranets that were not based on an open (and, therefore,
not cost effective information infrastructure) like the Internet. In the WTO Work Programme
on Electronic Commerce, it is understood to mean the production, distribution, marketing,
sale or delivery of goods and services by electronic means. A commercial transaction can be
divided into three main stages: the advertising and searching stage, the ordering and payment
stage and the delivery stage. Any or all of these may be carried out electronically and may,
therefore, be covered by the concept of ‘electronic commerce’. Broadly defined, electronic
commerce encompasses all kinds of commercial transactions that are concluded over an
electronic medium or network, essentially, the Internet. Ecommerce covers three main types
of transactions, i.e. business-to-consumer (B2C), business-to-business (B2B), and business-
to-government (B2G). Ecommerce has allowed firms to establish a market presence, or to
enhance an existing market position, by providing a cheaper and more efficient distribution

16
chain for their products or services. One example of a firm that has successfully used
ecommerce is Target. This mass retailer not only has physical stores, but also has an online
store where the customer can buy everything from clothes to coffee makers to action figures.
It is about using the power of digital information to understand the needs and preference of
each customer and each partner to customize products and services for them, and then to
deliver the products and services as quickly as possible. Personalized, automated services
offer businesses the potential to increase revenues, lower costs, and establish and strengthen
customer and partner relationships.

To achieve these benefits many companies engage in electronic commerce for direct
marketing, selling, customer service, online banking and billing, secure distribution of
information, value chain trading and corporate purchasing. An ecommerce strategy helps
deliver a technology platform, a portal for online service, and a professional expertise that
companies can leverage to adopt new ways of doing business. Platforms are the foundation of
any computer system. An ecommerce platform is foundation of technologies and products
that enable and support electronic commerce. With it, business can develop low cost, high-
value commerce systems that are easy to grow as business grows.

2.2.1 Various application of E-commerce

Businesses communicate with customers and partners through channels. The internet is one
of the newest and best business communications channels. It is fast, reasonably reliable,
inexpensive, and universally accessible. It reaches virtually every business and more than 200
million consumers. Electronic commerce, being a new field, is just developing its theoretical
or scientific foundations. It has several applications. The major applications of E-commerce
are as follow:

1. Direct marketing selling and service

Today more Web sites focus on direct marketing, selling and service than on any other type
of electronic commerce. Direct selling was the earliest type of e-commerce, and has proven to
be steppingstone to more complex commerce operations for many companies. Successes such
as Amazon.com, Flipkart, Dell computer, and the introduction e-ticket by major airlines, have
catalyzed the growth of this segment, proving the reach and customer acceptance of the
internet.

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2. Financial and Information Service

A broad range of Financial and Information Service are performed over the internet today,
and sites that offer them are enjoying rapid growth. These sites are popular because they help
consumers, businesses of all sizes, and financial institutions distribute some of their most
important information over the internet with greater convenience and richness than is
available using other channels. For example, online banking, online billing, secure
information distribution.

3. Maintenance, Repair and Operation

The internet also offers tremendous time and cost savings for corporate purchasing of low-
cost, high-volume goods for maintenance, repair and operations activities. Typical goods
include office supplies, office equipment and furniture, computers, and replacements parts.
The internet can transform corporate purchasing from a labor and paperwork–intensive
process into a self-service application. Company employees can order equipment on Web
site, company officials can automatically enforce purchase approval and policies through
automated business rules, and suppliers can keep their catalog information centralized and
up-to-date. Purchase order application can then use the internet to transfer the order to
suppliers. In response, suppliers can ship the requested goods and invoice the company over
the internet. In addition to reduce administrative costs, internet-based corporate purchasing
can improve order tracking accuracy, better enforce purchasing policies, provide better
customer and supplier service, reduce inventories, and give companies more power in
negotiating exclusive or volume discount contracts. In other words, the internet and e-
commerce have changed the way enterprises serve customers and compete with each other,
and have heightened awareness for competing supply chains. No other business model
highlights the needs for tight integration across suppliers, manufacturers, and distributors
quite like the value chain. Delays in inventory tracking and management can ripple from the
cash register all the way back to raw material production, creating inventory shortages at any
stage of the value chain. The resulting out of stock events can mean lost business. The
internet promises to increase business efficiency by reducing reporting delays and increasing
reporting accuracy. Speed is clearly the business imperative for the value chain.

4. A retailer can save his existence by linking his business with the on-line distribution.
By doing so, they can make available much additional information about various

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 things to the consumers, meet electronic orders and be in touch with the consumers all
the time. Therefore, E-Commerce is a good opportunity. In the world of e-commerce
the existence of the wholesalers is at the greatest risk because the producer can easily
ignore them and sell their goods to the retailers and the consumers. In such a situation
those wholesalers can take advantage of ecommerce who are capable of establishing
contractors with reputed producers and linking their business with the on- line.

5. Marketing

Many issues of marketing offline are relevant to online E-Commerce - for example, cost
benefits of advel1isements and advertisement strategies. Other issues are unique to E-
Commerce, ranging from online marketing strategy to interactive kiosks.

6. Computer sciences

Many of the issues in the infrastructure of E-commerce, such as languages, multimedia, and
networks, fall into the discipline of computer sciences. Intelligent agents play a major role in
E-Commerce as well.

7. Consumer behavior and Psychology

Consumer behavior is the key to the success of B2C trade, but so is the behavior of the
sellers. The relationship between cultures and consumer attitude in electronic market is an
example of a research issue in the field.

8. Finance

The financial markets and banks are one of the major participants in ecommerce. Also,
financing arrangements are part of many online transactions. Issues such as using the Internet
as a substitute for a stock exchange and fraud in online stock transactions are a sample of the
many topics of the field.

9. Economics

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E-commerce is influenced by economic forces and has a major impact on world and country
economies. Also, theories of micro and macroeconomic need to be considered in E-
Commerce planning, as well as the economic impacts of E-Commerce on firms.

10. Management Information Systems (MIS)

The information systems department is usually responsible for the deployment of e-

commerce. This discipline covers issues ranging from systems analysis to system integration,
not to mention planning, implementation, security, and payment systems, among others.

11. Business Law and Ethics

Legal and ethical issues are extremely important in e-commerce, especially in a global
market. A large number of legislative bills are pending, and many ethical issues are
interrelated with legal ones, such as privacy and intellectual property.

12. Others

Several other disciplines are involved in various aspects of E-Commerce to a lesser extent-
for example, linguistics (translation in international trades), robotics and sensory systems,
operations research / management science, statistics, and public policy and administration.
Also, e-commerce is of Interest to engineering, health care, communication, and
entertainment publishing.

For developing countries like India, e-commerce offers considerable opportunity. E-

commerce in India is still in growing stage, but even the most pessimistic projections indicate
a boom. It is believed that low cost of personal computers, a growing installed base for
Internet use, and an increasingly competitive Internet Service Provider (ISP) market will help
fuel e-commerce growth in Asia’s second most populous nation. The first e-commerce site in
India was rediff.com. It was one of the most trafficked portals for both Indian and non
residents Indians. It provided a wealth of Indian-related business news a reach engine, e-
commerce and web solution services. The past 5 years have seen a rise in the number of
companies enabling e-commerce technologies and the internet in India. Major Indian portal
sites have also shifted towards e-commerce instead of depending on advertising revenues.
The web communities built around these portal sites with content have been effectively
targeted to sell everything from event and mouse tickets the grocery and computers. In spite

20
of RBI regulation low internet usage e-commerce sites have popped up everywhere hawking
things like groceries, bakery items, gifts, books, audio and video cassettes, computer etc.

2.2.2 Types of e-commerce

Based on the type of relationship between different sides of commerce, ecommerce can be
categorized in different types.

a. Business to Business E-commerce (B2B)

E-commerce is the process of conducting business on the Internet. Its scope includes not only
buying and selling but also services, fulfilling the needs of customers and collaborating with
business partners.

Business to business e-commerce is smart business. The opportunity for business to business
e-commerce is even greater.

A wholesaler may sell products to the retailer. There are advanced ecommerce software
which support multi-tier pricing. This helps to set up online stores to offer preferred pricing
to some vendors and shared price to others. This includes internet-enabled initiatives of an
enterprise to form commercial linkages with another enterprise, dealer, warehouse or
manufacturer.

In this form of e-commerce, e paperwork and time-to-market get vastly reduced. Throughout
the world, this e-commerce mode is the biggest. In a B2B transaction, the interaction is
between businesses. For example, a website that is catching for the steel industry might have
facility for buyers and sellers to list their requirements and post their products. It helps them
in quickly closing the transactions and the buyer can get quality, material and can choose
from different suppliers.

B2B commerce is a growing business in the e-commerce arena- with the increasing use of the
internet, more and more business are realizing the commercial advantage of giving business
clients a streamlined and easy manner to order products or service online. It facilitates access
to the ordering process to only those with whom a concern has a commercial relationship.

Business to Business e-commerce provides small and medium enterprises (SMES) with an
excellent opportunity to access new markets improve customer service and reduce costs. And

21
while hurdles exist, they should be viewed more as speed breakers rather than road barriers.
As a medium of information storage and dissemination, the internet has and is emerging a
clear winner. Its rate of penetration has far outpaced the growth of other popular media such
as newspaper, radio and television.

B2B transactions are however relatively high value in nature and organizations are slow to
change their traditional systems for the supply chain management. The reasons for the growth
in B2B e-commerce are many. In an increasing competitive scenario, e-commerce offers
highly attractive cost saving options. The shift to this process is often driven by the needs of
buyers.

B2B e-commerce is expected to be the largest mode of transacting e-business and is a global
phenomenon. It involves taking internet enabled initiatives to form commercial links with
other enterprises, dealers or manufacturers. In this form of e-commerce, a business firm
places orders for supplies with another business firms directly over the Internet. Paperwork
and time required for processing the order and delivery of the goods are thus reduced to a
great extent.

b. Business to Consumers E-commerce (B2C)

It is for the customers to buy stores from the web. The problem to be recognized in this is to
secure payment, using encryption, transaction integrity, quick response, time and reliability.

B2C e-commerce involves selling of goods and services to consumers or end users. It allows
them to browse the product catalogue, select products or services and complete the order
online.

In a B2C transaction, the interaction is between a consumer and the preferred business. For
example, the most popular site is amazon.com, which is the first online bookseller which has
proved a potential competitor to the traditional bricks and mortar booksellers such as Barrens
and Noble.

In this category of e-commerce, businesses use the internet to offer to consumers sales and
services around the world 24 hours a day, seven days a week and 365 days a year, the sites
Amazon, Rediff and Uphar are among those belonging to this category. These websites are
meant for selling goods directly to consumers through the internet. The two-way accessibility

22
of the internet enables operating companies to directly ascertain customer preference and
buying trends.

Businesses are using these consumer insights to formulate marketing strategies and offer to
the customers what they want and when they want. E-business in this mode significantly
reduces the costs associated with intermediaries, service centers and mass marketing
campaigns. Since e-commerce makes just in time delivery possible, the supplier does not
have to store the goods. He can procure them from the suppliers as and when he gets the
order from the buyer through the internet.

B2C is the most popular form of e-commerce, wherein the individuals are directly involved
in B2C e-commerce, and businesses use the internet for offering their products or services 24
hours a day through global access. The sites Amazon.com and Rediff are among these. These
websites spell goods directly to consumers over the Internet. The two way accessibility
feature of the internet enables operating companies to ascertain consumer preferences and
buying trends directly.

There are five major activities involved in conducting B2C e-commerce.

1. Info sharing:

A B2C e-commerce may use some or all of the following applications and technologies to
share information with customers: Online advertisements, e-mail, newsgroups/discussion
groups, company web site, online catalogs, message board systems, bulletin board systems,
multiparty conferencing.

2. Ordering:

A customer may use electronic e-mail or forms available on the company's web site to order a
product from a B2C site. A mouse click sends the essential information relating to the
requested piece(s) to the B2C site.

3. Payment:

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Credit cards, electronic checks, and digital cash are among the popular options that the
customer has as options for paying for the goods or services.

4. Fulfillment

Fulfillment that is responsible for physically delivering the product or service from the
merchant to the customer. In case of physical products (books, videos, CDs), the filled order
can be sent to the customer using regular mail, MNG, Yurtiçi Cargo, FedEx, or UPS. As
expected for faster delivery, the customer has to pay additional money. In case of digital
products (software, music, electronic documents), the e-business uses digital documentations
to assure security, integrity, and privacy of the product. It may also include delivery address
verification and digital warehousing that stores digital products on a computer until they are
delivered. The e-business can handle its own fulfilment operations or outsource this function
to third parties with moderate costs.

5. Service and support:

It is much cheaper to maintain current customers than to attract new customers. For this
reason, e-businesses should do whatever that they can in order to provide timely, high-quality
service and support to their customers.

c. Consumer to Consumer E-commerce (C2C)

Here interaction is between consumers to consumer. For example, in sites like e-Buy Bid or
Buy.com, Baazi.com which are auction sites, one can virtually sell and buy any goods (either
used or new ones). This form of e-commerce is nothing but the cyber version of the good old
auction houses. If anyone wants to sell anything, all one has to do is post a message on the
site, giving details of the product and the expected price and wait for an interested customer
to turn up and buy it. The buyer gets in touch with the seller through the Internet and the deal
is crossed once the amount is finalized. Online message boards and barters are also examples
of C2C e-commerce.

d. Consumer-to-Business E-commerce (C2B)

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E-commerce, by empowering the customer, has been strategically redefining business. An
example of C2B model of e-commerce is the site Price line.com, which allows prospective
airline travelers, tourists in need of hotel reservations etc. to visit its websites and indicate
their preferred price for travel between any two cities. If an airline is willing to issue a ticket
on the customers offered price, the consumer can then travel to the mentioned destination at
his terms.

e. Business to Employees E-commerce (B2E)

This is concerned more with marketing a corporation's internal processes more efficiently.
Customer care and support activities also hold ground. The requirement is that are all self-
service with applications on the web that the employees can use themselves. Examples of
B2E applications include:

 Online insurance policy management

 Corporate announcement dissemination
 Online supply requests
 Special employee offers
 Employee benefits reporting
 Management

f. Business-to-government

Business-to-government (B2G) is a derivative of B2B marketing and often referred to as a

market definition of "public sector marketing" which encompasses marketing products and
services to various government levels - including central, state and local - through integrated
marketing communications techniques such as strategic public relations, branding,
advertising, and web-based communications. Government agencies typically have pre-
negotiated standing contracts vetting the vendors/suppliers and their products and services for
set prices. These can be state, local or federal contracts and some may be grandfathered in by
other entities. There are multiple social platforms dedicated to this vertical market and they
have risen in popularity with the onset of the ARRA/Stimulus Program and increased
government funds available to commercial entities for both grants and contracts.

g. Government-to-Business

25
Government-to-Business (G2B) is the online non-commercial interaction between local and
central government and the commercial business sector, rather than private individuals
(G2C).

2.3 E-contract

An ‘electronic’ contract is an agreement presented and consummated entirely in an on-line

environment; most often on the Internet. E-contract is a contract modeled, specified, executed
and deployed by a software system. E-contracts are conceptually very similar to traditional
(paper based) commercial contracts. Vendors present their products, prices and terms to
prospective buyers.

Buyers consider their options, negotiate prices and terms (where possible), place orders and
make payments. Then, the vendors deliver the purchased products. Nevertheless, because of
the ways in which it differs from traditional commerce, electronic commerce raises some new
and interesting technical and legal challenges.

Electronic contracts are governed by the basic principles provided in the Indian Contract Act,
1872, which mandates that a valid contract should have been entered with a free consent and
for a lawful consideration between two majors. Section 10A of the Information Technology
Act, 2000 provides validity to e-contracts. So, both Indian Contract Act and IT Act needs to
be read in conjunction to understand and provide legal validity to e-contracts. Further, section
3 of the Evidence Act provides that the evidence may be in electronic form. The Supreme
Court in Trimex International FZE Ltd. Dubai v. Vedanta Aluminum Ltd. 12 has held that e-
mails exchanges between parties regarding mutual obligations constitute a contract.

In an online environment, the possibility of minors entering into contracts increases, more so
with the increasing usage of online medium among minors and their preference to shop
online or purchase online goods/services. It becomes crucial for an online business portal to
keep such possibility in consideration and qualify its website or form stating that the
individual with whom it is trading or entering into the contract is a major.

Stamping of contracts is yet another issue. An instrument that is not appropriately stamped
may not be admissible as evidence unless the necessary stamp duty along with the penalty
has been paid. But payment of stamp duty is applicable in case of physical documents and is

12
“2010 (1) SCALE 574”

26
not feasible in cases of e-contracts. However, as the payment of stamp duty has gone online
and e-stamp papers are available, it can become a possibility later that stamp duty might be
asked on e-contracts as well.

The other crucial issue is the consent and the way offers are accepted in an online
environment. In a click wrap and shrink wrap contract, the customers do not have any
opportunity to negotiate the terms and conditions and they simply have to accept the contract
before commencing to purchase. Section 16(3) of the Indian Contract Act provides that where
a person who is in a position to dominate the will of another, enters into a contract with him,
and the transaction appears, on the face of it or on evidence adduced, to be unconscionable,
the burden of proving that such contract was not induced by undue influence shall lie upon
the person in a position to dominate the will of the other. So, in cases of dispute over e-
contracts the entity carrying out the e-commerce will have the onus to establish that there was
no undue influence. Further, section 23 of the Indian Contract Act provides that the
consideration or object of any agreement is unlawful when it is forbidden by law, or is of
such a nature that if permitted, it would defeat the provisions of any law; or is fraudulent, or
involves or implies injury to the person or property of another, or the Court regards it as
immoral or opposed to public policy.

2.3.1 Types of Electronic Contracts

1. ‘Click-Wrap’, ‘Click-Through’, or ‘Web-Wrap’ contacts are electronic contacts that

require the user to scroll through terms and conditions (or multiple Web pages on a
Web site) and to expressly confirm the user’s agreement to the terms and conditions
by taking some action, such as clicking on a button that states ‘I Accept’ or ‘I Agree’
or some similar statement, prior to being able to complete the transaction. Click-
Through contracts are often found in software products or on Web sites.

2. ‘Browse-Wrap’ contracts are terms and conditions of use that to do not require the
express agreement of a user. They are often located in software or are posted on a
Web site and may make some statement that indicates use of the software or Web site
constitutes the users agreement to the terms. Often such terms may not have been
brought to the attention of the user.

3. ‘Electronic Mail (e-mail)’, is a method of sending an electronic message from one

person to another using the Internet, it is a convenient method of time-delayed direct

27
 communication. While an e-mail may be a singular message, it also possesses the
ability to form contracts. Consequently, e-mail is viewed as both a formal and
informal communications medium. People often regard informal e-mail arrangements
and business correspondence as non-contractual events. Essentials of an electronic
contract. As in every other contract, an electronic contract also requires the following
necessary ingredients:

1. An offer needs to be made

In many transactions (whether online or conventional) the offer is not made directly one-on-
one. The consumer ‘browses’ the available goods and services displayed on the merchant’s
website and then chooses what he would like to purchase. The offer is not made by website
displaying the items for sale at a particular price. This is actually an invitation to offer and
hence is revocable at any time up to the time of acceptance. The offer is made by the
customer on placing the products in the virtual ‘basket’ or ‘shopping cart’ for payment.

2. The offer needs to be accepted

As stated earlier, the acceptance is usually undertaken by the business after the offer has been
made by the consumer in relation with the invitation to offer. An offer is revocable at any
time until the acceptance is made.

3. Lawful Consideration

Any contract to be enforceable by law must have lawful consideration, i.e., when both parties
give and receive something in return. Therefore, if an auction site facilitates a contract
between two parties where one person provides a pornographic movie as consideration for
purchasing an mp3 player, then such a contract is void.

4. Intention to Create Legal Relations

If there is no intention on the part of the parties to create legal relationships, then no contract
is possible between them. Usually, agreements of a domestic or social nature are not contracts

28
and therefore are not enforceable, e.g., a website providing general health related information
and tips.

5. The parties must be competent to contract

Contracts by minors, lunatics etc are void. All the parties to the contract must be legally
competent to enter into the contract.

6. Free Consent

Consent is said to be free when there is absence of coercion, misrepresentation, undue

influence or fraud. In other words, there must not be any subversion of the will of any party
to the contract to enter such contract. Usually, in online contracts, especially when there is no
active real-time interaction between the contracting parties, e.g., between a website and the
customer who buys through such a site, the click through procedure ensures free and genuine
consent.

7. The object of the contract must be lawful

A valid contract presupposes a lawful object. Thus a contract for selling narcotic drugs or
pornography online is void.

8. Certainty and Possibility of Performance

A contract, to be enforceable, must not be vague or uncertain and there must be possibility of
performance. A contract, which is impossible to perform, cannot be enforced, e.g., where a
website promises to sell land on the moon.

2.3.2 Procedures available for forming electronic contracts

1. E-mail:

Offers and acceptances can be exchanged entirely by e-mail, or can be combined with paper
documents, faxes, telephonic discussions etc.

2. Web Site Forms:

The seller can offer goods or services (e.g. air tickets, software etc) through his website. The
customer places an order by completing and transmitting the order form provided on the

29
website. The goods may be physically delivered later (e.g. in case of clothes, music CDs etc)
or be immediately delivered electronically (e.g. e-tickets, software, mp3 etc).

3. Online Agreements:

Users may need to accept an online agreement in order to be able to avail of the services e.g.
clicking on ‘I accept’ while installing software or clicking on ‘I agree’ while signing up for
an email account.

Legal issues of Online Contracts

Existence of a valid contract forms the crux of any transaction including an e-commerce
transaction. In India, e-contracts like all other contracts are governed by the basic principles
governing contracts in India, i.e. the Indian Contract Act, 1872 which inter alia mandate
certain pre-requisites for a valid contract such as free consent and lawful consideration. What
needs to be examined is how these requirements of the Indian Contract Act would be fulfilled
in relation to e-contracts. In this context it is important to note that the Information
Technology Act, 2000 provides fortification for the validity of e-contracts.

Unless expressly prohibited under any statute, e-contracts like click-wrap agreements would
be enforceable and valid if the requirements of a valid contract as per the Indian Contract Act
are fulfilled. Consequently the terms and conditions which are associated with an e-
commerce platform are of utmost importance in determining and ensuring that e-commerce
transactions meet with the requirements of a valid online contract.

i. Signature Requirements

There is no requirement under the Indian Contract Act to have written contracts physically
signed. However, specific statues do contain signature requirements. For instance the Indian
Copyright Act, 1957 states that an assignment of copyright needs to be signed by the
assignor. In such cases the Information Technology Act equates electronic signature with
physical signatures. An electronic signature is supposed to be issued by the competent
authorities under the Information Technology Act.

ii. Contracts with Minors

30
The nature of e-commerce is that is virtually impossible to check the age of anyone who is
transacting online. This may pose problems and liabilities for ecommerce platforms. The
position under Indian law is that a minor is not competent to enter into a contract and such a
contract is not enforceable against the minor. The age of majority is 18 years in India.

iii. Stamping Requirements

Every instrument under which rights are created or transferred needs to be stamped under the
specific stamp duty legislations enacted by different states in India. An instrument that is not
appropriately stamped may not be admissible as evidence before a competent authority unless
the requisite stamp duty and the prescribed penalty have been paid. In some instances
criminal liability is associated with intentional evasion of stamp duty. However, the manner
of paying stamp duty as contemplated under the stamp laws is applicable in case of physical
documents and is not feasible in cases of e-contracts.

Place of contract and the jurisdiction of court Under the traditional rules of contracts in the
real world, the place where a contract is concluded is the place where the letter of acceptance
is posted (where the postal rule is applicable) and in the case of instantaneous contracts it is
where the offer or receives the acceptance.

The IT Act proposes that the place of the dispatch and the place of receipt is the place where
the originator and the acceptor have their respective places of business. This means that
irrespective of the place from where the electronic record is sent or received, the place of
contract would be either a place where business of the offer or the acceptor is.

This would lead to some contradiction with the Civil Procedure Code which in Section 20
lays down that a suit may be brought up in the place where the defendant has his place of
business or where the cause of action arises. The place where the cause of action occurs may
be the place where the contract takes place or where the performance takes place. The
Information Technology Act appears to have fused these two concepts of place of business
and the place where the contract is formed.

The situation may be summed up as under: That in the case of e-mail contracts the place of
contract formation will be the place where the acceptor has his place of business and in the
case of web-click contracts, the place of contract will be the place where the offer or has his
place of business. Thus, by fusing the concepts of place of contract formation and the

31
defendant’s place of business, the jurisdictional avenues available to the aggrieved party
appear to have been limited.

2.3.3 Time of formation of contract

The importance of time of formation of contract is well known to any student of law viz. to
decide priorities between competing claims, to determine the law applicable to the contract
etc. The time aspect of contract formation is also important in ascertaining the place aspect of
contract formation. If the contract is classified as one where the postal rule applies, then the
place of formation of contract would be the place where the acceptor commits his acceptance.
On the other hand, if it is classified as one to which receipt rules would apply, then the place
where the contract would be formed would be the place where the offer or receives
acceptance.

Thus, it is essential that the law determines the ‘when’ of contract formation. The Model Law
guidelines state that the Model Law does not intend to define the ‘when’ and ‘where’ of
contract formation. The Model Law only lays down a framework of rules regarding dispatch
and receipt of electronic records. The principles of formation of contract are to be arrived at
by a combined application of the domestic contractual principles and the relevant provisions
of the Model Law.

The rules regarding formation of contract can be broadly grouped into two categories:

a) Mailbox rule or postal rule which is applicable when the means of communication is
non-instantaneous like post, telegraph etc. which states that a contract comes into
effect when the acceptor commits his acceptance to the post. The rule is designed to
remove uncertainty from the contract-formation process. It provides the offered with
the confidence that an acceptance once posted will be effective even if postal system
delays delivery of the acceptance beyond the offer date, and

b) Receipt rule which is applicable when the communications are instantaneous like
telephone, telex or fax. It lays down that a contract is complete when the acceptance is
received by the offer or.

32
The Information Technology Act, Section 13 provides the framework for understanding the
principles of contract formation in the cases of electronic contracts. It lays down inter alia,
that, unless otherwise agreed:

1. the dispatch of an electronic record occurs when it enters a computer resource outside
the control of the originator;

2. the time of receipt of an electronic record is the time when record enters the
designated computer resource (if the addressee has a designated computer resource);

3. if the electronic record is sent to a computer resource of the addressee that is not the
designated computer resource, receipt occurs at the time when the electronic record is
retrieved by the addressee;

4. If the addressee has not designated a computer resource along with specified timings,
if any, receipt occurs when the electronic record enters the computer resource of the
addressee.

However, the above rules do not tell us anything more than when dispatch and receipt of
electronic records takes place. Therefore, in order to understand the rules relating to
electronic contract formation, the principles of the Indian Contract Act will have to apply in
this context. Section 4 of the Contract Act lays down the following rules regarding
communications of offers and acceptances:

1. The communication of a proposal is complete when it comes to the knowledge of the

person to whom it is made.

2. The communication of an acceptance is complete, - as against the proposer, when it is

put in a course of transmission to him, so as to be out of the power of the acceptor; as
against the acceptor, when it comes to the knowledge of the proposer.

3. The communication of a revocation is complete as against the person who makes it,
when it is put into a course of transmission to the person to whom it is made, so as to
be out of the power of the person who makes it; as against the person to whom it is
made, when it comes to his knowledge.

33
4. A combined application of Section 4 of the Contract Act and Section 13 of the
Information Technology Act would reveal the following law for contract formation in
the case of electronic contracts in the event that nothing contrary has been agreed to
between the parties in their contract:

a) The communication of an offer becomes complete at the time when the electronic
offer enters any information system designated by the offeree for the purpose, or, if no
system is designated for the purpose, when the electronic offer enters the information
system of the offeree, or, if any information system has been designated, but the
electronic offer is sent to some other information system, when the offeree retrieves
such electronic record.

b) The communication of an acceptance is complete — as against the offeror when the

electronic acceptance is dispatched such that it enters a computer resource outside the
control of the acceptor.

c) As against the acceptor, the communication of acceptance would be complete when

the electronic acceptance enters any information system designated by the offer or for
the purpose, or, if no system is designated for the purpose, when the acceptance enters
the information system of the offer or, or, if any information system has been
designated, but the electronic record is sent to some other information system, when
the offer or retrieves such electronic acceptance.

d) The communication of revocation (of an offer or acceptance) is complete as against

the person who makes it when the electronic record is dispatched such that it enters a
computer resource outside the control of the person making such offer or acceptance.

e) As against the person to whom it is made, such revocation is complete when it comes
to his knowledge i.e. Rule (2), (3) or (4) of Section 13 enunciated above would apply.

A binding contract would take place once the acceptor dispatches the electronic record such
that it enters a computer resource outside the control of the acceptor.

However, the above proposition may not hold well in all types of electronic contracts. The
Supreme Court in Bhagwandas v. Girdharlal, following the English decision in Entores Ltd.
v. Miles Far East Corpn, has held that Section 4 of the Contract Act is only applicable in

34
cases of non-instantaneous forms of communication and would not apply when instantaneous
forms of communication are used. The Court observed that the draftsman of the Contract Act
did not contemplate the use of instantaneous means of communications. Hence, where
proposal and acceptance are made by instantaneous means of communications like the
telephone, telex etc., the postal rule does not apply and the contract is made where the
acceptance is received. Therefore, the default rules elucidated above may have relevance only
in non-instantaneous forms of contract formation. In the electronic context, the following two
situations need to be considered: (a) E-mail contracts. (b) Web-click contracts.

a) E-mail contracts:

Though e-mail communication has some of the trappings of instantaneous communication,

nevertheless, it is a fragmented process involving many stages. The e-mail message is split
into various packets and sent via different routes. Further, unlike in instantaneous forms of
communication, the sender does not know if the transmission of the e-mail is successful, for
even though he gets a delivery receipt, it only signals delivery to the mailbox and does not
indicate that the other party has the knowledge of the receipt. Thus, e-mail messages would
come under the category of non-instantaneous form of communication. The default rules
enunciated above would apply to e-mail contracts.

b) Web-click contracts:

The case of web-click or click-wrap contracts is different as such contracts are formed
instantaneously: The main difference between clickwrap contracts and e-mail is that
communications between web clients and servers, unlike e-mails is instantaneous. The best
way to imagine the transfer of data between computers is to treat it as a telephone
conversation, just one between computers rather than individuals. If either party goes offline
at any point, the other will be aware of the change in status. This is because all
communications between clients and servers have an inbuilt self-checking mechanism called
a check sum.

Applying the ratio of Bhagwandas and Entores cases it would seem that in web-click
contracts a contract is completed when the offer or receives the acceptance in
contradistinction to the postal rules applicable to e-mail contracts. Further, communication of
an offer or acceptance in the web-click mode is complete when the addressee is in receipt of
the electronic record as defined in Section 13(2) of the Information Technology Act, 2000.

35
2.3.4 Doctrine Privity of contract

As per the dictionary meaning privity of contract means: Legal doctrine that a contract
confers rights and imposes liabilities only on its contracting parties. Privity is the legal term
for a close, mutual, or successive relationship to the same right of property or the power to
enforce a promise or warranty. As per the legal definition of privity of contract: ‘The doctrine
of privity in contract law provides that a contract cannot confer rights or impose obligations
arising under it on any person or agent except the parties to it.’

The doctrine of privities of contract means that only those involved in striking a bargain
would have standing to enforce it. In general this is still the case, only parties to a contract
may sue for the breach of a contract, although in recent years the rule of privities has eroded
somewhat and third party beneficiaries have been allowed to recover damages for breaches of
contracts they were not party to. There are two times where third party beneficiaries are
allowed to fall under the contract. The duty owed test looks to see if the third party was
agreeing to pay a debt for the original party. The intent to benefit test looks to see if
circumstances indicate that the promise intends to give the beneficiary the benefit of the
promised performance. Any defense allowed to parties of the original contract extend to third
party beneficiaries. A recent example is in England, where the Contract (Rights of Third
Parties) Act 1999 was introduced.

Indian law is practically same as the English common law. However, under the Indian law
‘consideration may move from the promise or any other person.’ In the chimney vs.
rammayya case, an old lady by a deed of gift, gave over certain properties to her daughter
under the direction that she should pay her aunt a certain sum of money. The same day the
daughter refused to pay her aunt the money on the plea that no consideration has moved from
her aunt to her. It was held that sister of the old lady (aunt) was entitled to maintain the suit as
consideration had move from the old lady, for her sister to the daughter.

2.3.5 Third Party Beneficiary

A third party beneficiary, in the law of contracts, is a person who may have the right to sue
on a contract, despite not having originally been a party to the contract. This right arises
where the third party is the intended beneficiary of the contract, as opposed to an incidental
beneficiary. It vests when the third party relies on or assents to the relationship, and gives the

36
third party the right to sue either the promissory or the promise of the contract, depending on
the circumstances under which the relationship was created.

In order for a third party beneficiary to have any rights under the contract, he must be an
intended beneficiary, as opposed to an incidental beneficiary. The burden is on the third party
to plead and prove that he was indeed an intended beneficiary.

2.3.6 Intended beneficiary

An intended beneficiary is that one party - called the promise - makes an agreement to
provide some consideration to a second party - called the promissory - in exchange for the
promise’s agreement to provide some product, service, or support to the third party
beneficiary named in the contract. The promise must have an intention to benefit the third
party - but this requirement has an unusual meaning under the law. Although there is a
presumption that the promise intends to promote the interests of the third party in this way, if
party A, contracts with party B, to have a thousand killer bees delivered to the home of A's
worst enemy, party C, then C is still considered to be the intended beneficiary of that
contract. There are two common situations in which the intended beneficiary relationship is
created. One is the creditor beneficiary, which is created where A owes some debt to C, and
A agrees to provide some consideration to B in exchange for B’s promise to pay C some part
of the amount owed.

The other is the done beneficiary, which is created where A wishes to make a gift to C, and A
agrees to provide some consideration to B in exchange for Bethany's promise to pay C the
amount of the gift. Under old common law principles, the donee beneficiary actually had a
greater claim to the benefits this created; however, such distinctions have since been
abolished. An incidental beneficiary is a party who stands to benefit from the execution of the
contract, although that was not the intent of either contracting party. If the contract is
breached by either party, an incidental third party has no rights to recover anything under the
contract.

2.4 Conclusion

The growth of the e-commerce industry is not only indicative of the increasing openness of
the public but has also brought to the front the issues that the legal system of the country has
been faced within. The legal system has constantly tried to be updated especially with the

37
enactment of IT Act to deal with lots of issues emerging from the use of internet. Therefore, a
comprehensive understanding of the legal regime and the possible issues that an e-commerce
business would face together with effective risk management plans has been the need of the
hour for e-commerce businesses to succeed in this industry.

An online contract is designed and enacted with an aim to provide security to online
transactions. It is formed to check frauds to promote and build confidence in genuine online
transactions and to give a legal status to the concept of digital signature. Online contract is a
much efficient concept in the interest of time and money in comparison to the traditional
method of paper and writing contract. But to keep a pace with the fast advancement of the
technology, a separate legislation in regard to electronic or online contract has to be enacted
in India.

38
 CHAPTER 3

CONSUMER ISSUE RELATING TO E-MARKETING

3.1 Introduction

Ecommerce has brought a paradigm shift in trading throughout the world. Although Indian e-
commerce sector has witnessed an impressive growth rate in the recent years, the sector is
still beset with some serious challenges. The etymological meaning of E-commerce is the
businesses transaction of buying and selling of products and services by & customers solely
through electronic medium, without using any paper documents. The Organization for
Economic Cooperation and Development (OECD) defines E-commerce as a new way of
conducting business, qualifying it as business occurring over networks which uses non-
proprietary protocols that are established through an open standard setting process such as the
Internet.

The rapid popularity and acceptance of e-commerce throughout the world is driven by the
greater customer choice and improved convenience in commercial transactions with the help
of internet where the vendor or merchant can sell his products or services directly to the
customer and the payment can be made electronic fund transfer system trough debit card,
credit card or net banking etc. Out of these convenience and ease in doing business, the e-
commerce market and its holding in the whole trade and commercial transactions is
increasing in demand as well as expanding very fast replacing non-e-commerce transactions
in so many sectors. E-commerce is already appearing in all areas of business and customer
services.13

With the increasing use of information and communication technology (ICT) s, a new branch
of jurisprudence known as Cyber Law or Cyber Space Law or Information Technology Law
or Internet Law, emerged to regulate law and order in cyber space. In 1996, for the first time,
a Model Law on E-commerce (MLEC) was adopted by United Nations Commission on
International Trade and Law (UNCITRAL) which was subsequently adopted by General
Assembly of United Nations. The main objective of MLEC was to bring a uniform law
relating to e-commerce at international level and to bring electronic transactions to the level
at par with paper-based transactions ascertaining the rights and liabilities of the transacting
13
“Rajendra Madhukar Sarode, “Future of E-Commerce in India Challenges & Opportunities” 1(12) IJAR 646
(2015)”

39
parties similar to those of paper-based transactions. India being a signatory to this Model law
enacted the Information Technology Act, 2000. Accordingly, to give effect the UNCITRAL
law on E-Signature (MLES), 2001 India enacted the Information Technology (Amendment)
Act, 2008.

The e-commerce revolution has just begun in India, and will encompass a much wider range
of goods and services on a pan India basis in just a few years from now. Ecommerce is
spawning thousands of entrepreneurs every year, and that number could swell to tens of
thousands annually within a year or two. In India e-commerce has huge potential having
middle class more than 288 million people in India. However the legal and regulatory
challenges have been limiting the growth of electronic commerce in India. It would be a pity
if regulatory haze and maze brings this emerging vibrant business and social ecosystem to
atrophy.14 The main problem generally faced by developing economies like India is that with
a completely different economic as well as technological set up, the proper and a replica
implementation of such ‘high-tech’ legislation as envisaged by the Model law becomes very
difficult. Even if the legislature fulfils the act of enacting a law, it becomes difficult to
enforce and implement in Indian scenario. Thus, a critical analysis of the existing laws and
regulations shows that various legal issues such as jurisdiction, taxation, intellectual property
rights and domain names in E-commerce remain untouched. We need more regulations for
making E-commerce transactions fairer and achieving a more consumer-friendly E-
commerce environment in India.

3.2 Legislation on E-commerce in India

3.2.1 Information Technology Act, 2000

The first ever law enacted by the Government of India on e-commerce was Information
Technology (IT) Act 2000. It was an enactment to give effect the UNCITRAL Model Law on
Electronic Commerce, 1996. The General Assembly of the United Nations adopted a
resolution on January 30, 1997 commending the Model Law on Electronic Commerce for a
favourable consideration by the Member States as a Model Law when they enact or revise
their laws, in view of the need for uniformity of the law applicable to alternatives to paper
based methods of communication and storage of information.

14
“Supra Note 1”

40
The main aim of the IT Act was to provide legal recognition to the transactions carried out by
the means of electronic data interchange and through other electronic means of
communications, commonly referred to as electronic commerce (e-commerce). The IT Act
2000 facilitates e-commerce and e-governance in the country. It contains provisions for Legal
recognition of electronic record and digital signatures rules for attribution of the e-record, for
mode and manner of acknowledgement, for determining time and place of dispatch and
receipt of electronic records. The Act also establishes a regulatory framework and lays down
punishment regimes for different cyber crimes and offences. Significantly, under the Act the
Certification authority is a focal point around which this Act revolves as most of the
provisions are relating to Regulation of Certification Authorities i.e., appointment of a
Controller of CAs, grant of license to CAs, recognition of foreign CAs and duties of
subscribers of digital signature certificates. It also made the offences like hacking, damage to
computer source code, publishing of information which is obscene in electronic form, breach
of confidentiality and privacy, and fraudulent grant and use of digital signatures punishable.
Further, it provides for civil liability i.e., Cyber contraventions and criminal violations,
penalties, establishment of the Adjudicating Authority and the Cyber Regulatory Appellate
Tribunals.15 The related provisions of the Indian Panel Code, 1860, the Indian Evidence Act,
1872, Banker’s Book Evidence Act, 1891 and the Reserve Bank of India Act, 1934 were also
amended to address the related issues of electronic commerce, electronic crimes and
evidence, and to enable further regulation as regards electronic fund transfer.

3.2.2 Information Technology (Amendment) Act, 2008

India incorporated Information Technology (Amendment) Act, 2008 to give implementation

of the UNCITRAL Model Law on Electronic Signatures, 2001 in India. The IT Act of 2000
was amended to make it technology neutral and recognized electronic signatures over
restrictive digital signatures. The Act brought many changes such as introduction of the
concept of e-signature, amendment of the definition of intermediary, etc. Besides, the state
assumed specific powers to control websites in order to protect privacy on the one hand, and
check possible misuse leading to tax evasions on the other hand. It is important to note that
this act recognized the legal validity and enforceability of the digital signature and electronic
records for the first time in India and also gave emphasis on the secure digital signatures and

15
“Dr. Jyoti Rattan, ‘Law Relating to E-commerce: International and National Scenario with Special Reference
to India’ 1(2) IJSSEI 7 (2015).”

41
secure electronic records. These changes were brought in an attempt to decrease the incidence
of electronic forgeries and to facilitate e-commerce transactions.

3.3 Legal Issues and Challenges of E-commerce

In the commercial relationship between parties, disputes are very normal. Disputes may arise
on the contractual terms and negotiations and there may be disputes both in and out of the
contractual terms which can be contractual as well as of non contractual nature, as for
example, Copyright issues, data protection issues and competition issues. Disputes
surrounding the B2C segment though small in monetary terms; yet involve issues such as
jurisdiction over the dispute, choice of law and problems of trans-border litigation which are
not practically feasible for a common customer. Various important legal issues relating to e-
commerce transactions are discussed hereafter:

3.3.1 Issues of Validity of the E-Contracts

All e-contracts entered online are to be governed by the Indian Contract Act, 1887.
Acceptance of the terms and conditions prior to any purchase made online creates an implied
contract between the purchaser and the seller. These are called ‘click-wrap’ contracts i.e.
contract created by clicking on an ‘I accept’ tab. ‘Browse-wrap’ is also a recognized form of
an implied contract which is created by the mere browsing of a website. Therefore all
principles of contract law would apply to an e-commerce transaction. All pre-requisites of a
valid contract are to be fulfilled as provided under the Contract Act. Intention to enter into a
legal relationship, the capacities of the parties to enter into a contract, free consent of the
parties are the most important aspects of valid contract, which can be defeated in a contract of
e-commerce very easily. Capacity to enter into a contract are the age of the parties entering
into a contract, soundness mind etc. Again the free consent means the consent of the parties
should not be induced by fraud, misrepresentation, mistake etc. The terms and conditions
associated with an e contract has to remain in conformity with the Indian Contract Act,
irrespective of the mode of ‘clickwrap’ or ‘shrinkwrap’ agreements to enter into a contract or
any other mode recognized by the IT Act.16 But, all of these aspects in an e-commerce
contract come into play only when there is a dispute. Some issues arise out of e-commerce
may make an e-contract void ab initio, thus rendering the contract inadmissible as evidence in
a court of law. Further, the e-contract in itself may be held unconscionable for providing no

16
“M.M.K. Sardana, Evolution of E‐Commerce in India: Challenges Ahead (Part 2)“

42
option of negotiation. Here, the question then arises whether such standard form contracts are
to be considered unconscionable and may be struck down by the courts. U.S. courts have not
been averse in treating such standard contracts as unconscionable, making them liable to be
struck down in facts and circumstances of the cases. In India there does not seem to be well
developed jurisprudence on the issue of whether standard form online agreements are
unconscionable. However, certain provisions under the Indian Contract Act deal with the
unconscionable contracts such as when the consideration in the contract or the object of the
contract is opposed to public policy. Thus, Indian law on e-commerce has little guidance to
offer on these serious issues.

3.3.2 Issues of Jurisdiction in Disputes

The core elements of e business are registering order, arranging delivery, and receiving e
payments. If and when such problems arise in such transactions, the setback can be
irreversible and are to be addressed with expediency. Settlement of disputes in the B2C
segment, particularly, is challenging. Disputes are traditionally settled within the physical
territory where one or both of the disputants are located. Different principles are applied in
different national jurisdictions in this regard. In the beginning, courts in different countries
began to access the internet merely to use it as a sufficient ground for assuming jurisdiction
over internet related transactions.17

The U.S. courts underlined the fact that orders of a foreign court against a legal entity of
another country would not automatically become operable in the country of origin, but would
need scrutiny by the court of country of origin with reference to its laws and constitution.18

The courts have laid down the parameter of determining the jurisdiction based on the level of
interactivity and commercial nature of the exchange of information that occurs on the website
in a particular jurisdiction and have categorized activities of the websites to into three areas:

a) Fully interactive sites where users purchase goods or services, exchange information
or files, or enter into agreements;

b) Fully passive sites where information is available for people to view; and,

c) Sites somewhere in the middle, with limited interaction.

17
“Id. at 5”
18
“Abha Chauhan, Evolution and Development of Cyber Law - A Study with Special Reference to India”

43
Courts are likely to take jurisdiction over the out of state operator of fully interactive sites,
unless the operator forbade the sale in the state or did not target them. Fully passive websites
are not likely to be subject to jurisdiction as they operate from outside the state.19

Jurisprudence in India with respect to issues relating to jurisdiction and enforcement issues in
e-commerce is still nascent. In general a lot of local statutes provide for a ‘long arm
jurisdiction’ whereby the operation of such local laws have extra-territorial application if an
act or omission has resulted in some illegal or prejudicial effect within the territory of the
country. The IT Act by the force of its Section 75 is extend to the whole of India and thus it
shall apply also to any or contravention there under committed outside India by any person
and the Act shall apply to any offence or contravention committed outside India by any
person if the act or conduct constituting the offence or contravention involves a computer,
computer system or computer network located in India.

Section 3 of the Indian Penal Code (IPC), 1869 provides that any person who is liable, by
any Indian law, to be tried for an offence committed beyond India shall be dealt with
according to the provisions of the IPC for any act committed beyond India in the same
manner as if such act had been committed within India.

Thus, there does not seem too much jurisprudence in India on the issue of jurisdiction in
cases of e-commerce.

3.3.3 Issues Relating to Privacy

In any e-commerce transaction, it is almost difficult to complete the online transaction

without collecting some form of personal information of the users such as details about their
identity and financial information. Apart from the collection of primary data from the users,
e-commerce platforms may also collect a variety of other indirect but very valuable
information such as users’ personal choices and preferences and patterns of search etc.

The IT Act deals with the concept of violation of privacy in a limited sense; it provides that
the privacy of a person is deemed to be violated where images of her private body areas are
captured, published or transmitted without her consent in circumstances where she would
have had a reasonable expectation of privacy and prescribes a punishment of imprisonment of
up to 3 years and/or fine of up to INR 2 lakhs.

19
“Section 66-E of the IT Act”

44
However, a notification has been issued under Section 43A of the IT Act, providing a
framework for the protection of data particularly relating to personal information and
sensitive personal data. Personal Information relates to the identity of the person and the
sensitive personal data includes information on password; bank account or credit card or
debit card or other payment instrument details etc. The notification cast obligations for the
protection of privacy in relation to personal information and sensitive personal information
on the punishment as provided under the IT Act besides making the entities liable for
monetary compensation. E retail companies and entities are thus required to have fool proof
instruments and arrangements in place to remain on the right side of law. Their servers and
those of their associates have to safeguard their systems from any unauthorised intrusion,
both internally and externally.20

3.3.4 Issues of Intellectual Property Rights

Intellectual Property concern is one of the foremost considerations for any company entering
into business including e-commerce transactions. The internet is a boundless with minimum
regulation and therefore the protection of intellectual property rights (IPR) is a challenge and
a growing concern amongst most e-businesses. India has well-defined legal and regulatory
framework for the protection of IPRs in the physical world. But, the efficacy of these laws to
safeguard the rights in and out of an e-commerce transaction is not simple.

Indian law is also silent on another important issue of the domain name disputes. A company
that commences e-commerce activities would at first have to get its domain name registered.
A domain name in simplistic terms is an address on the internet. In more technical terms a
domain name is an easily recognizable and memorable name to the Internet Protocol
resource. Domain names normally fall within the purview of trademark law. A domain name
registry will not register two identical domain names but can register a similar domain name.
This leads to a situation where deceptively similar domain names can be registered by a third
party. There is no specific Indian law on domain names except the judicial pronouncements,
which have reiterated the principles of law that domain names are valuable property and are
entitled to trade mark protection.21

20
“Nishith Desai Associates, ‘E‐commerce in India, Legal, Tax and Regulatory Analysis’ ”
21
“Sumanjeet, ‘E-Commerce Laws In The Indian Perspective’ ”

45
3.4 Identity Theft and Impersonation

The IT Act provides that the identity of a person shall be deemed to have been stolen when
any unique identification of a person (such as her electronic signature or password) is
fraudulently or dishonestly used. The Act prescribes a penalty of imprisonment of up to 3
years and fine up to INR 1 lakh.22

The IT Act provides that whoever, by means of any communication device or computer
resource cheats by impersonation, shall be punished with imprisonment of up to 3 years and
with fine of up INR 1 lakh.23

The IPC further provides that any person who cheats by personation shall be punishable with
imprisonment of up to three years and/ or fine.24

3.5 Privacy

For an e-commerce platform, it is almost difficult to complete any online transaction without
collecting some form of personal information of the users such as details about their identity
and financial information. Apart from the collection of primary data from the users, e-
commerce platforms may also collect a variety of other indirect information such as users’
personal choices and preferences and patterns of search.

Hence, an important consideration for every e-commerce platform is to maintain the privacy
of its users. Two primary concerns that a user of e-commerce platforms would have are:

i. Unauthorized access to personal information

ii. Misuse of such personal information.

Historically, the concept of privacy and data protection were not addressed in any Indian
legislation. In the absence of a specific legislation, the Supreme Court of India in the cases of
Kharak Singh v State of UP25 and People's Union of Civil Liberties v. the Union of India 26
recognised the “right to privacy” as a subset of the larger “right to life and personal liberty”
under Article 21 of the Constitution of India.
22
“Section 66-C of the IT Act.”
23
“Section 66-D of the IT Act.”
24
“Section 419 - Punishment for cheating by personation Whoever cheats by personation shall be punished with
imprisonment of either description for a term which may extend to three years, or with fine, or with both.”
25
“AIR 1963 SC 1295”
26
“1997 (1) SCC 318”

46
However a right under the Constitution can be exercised only against any government action.
Non state initiated violations of privacy may be dealt with under principles of torts such as
defamation, trespass and breach of confidence as applicable. The IT Act deals with the
concept of violation of privacy in a limited sense; it provides that the privacy of a person is
deemed to be violated where images of her private body areas are captured, published or
transmitted without her consent in circumstances where she would have had a reasonable
expectation of privacy27 and prescribes a punishment of imprisonment of up to 3 years and/or
fine of up to INR 2 lakhs.

3.6 Data Protection

Security of the information provided during the online transaction is a major concern. Under
section 43A of the IT Act the "Reasonable practices and procedures and sensitive personal
data or information Rules, 2011" have been proposed, which provide a framework for the
protection of data in India. Data can be personal, which has been defined as "any information
that relates to a natural person, which, either directly or indirectly, in combination with other
information available or likely to be available with a body corporate, is capable of identifying
such person." The date can also be sensitive and a sensitive personal data consists of
password, financial information, physical, physiological and mental health condition, sexual
orientation, medical records and history and biometric information. The entity collecting data
should have a privacy policy in place, should always obtain consent from the provider of
sensitive information and maintain reasonable security practices and procedures.
Unauthorized access to personal information and any misuse of such personal information
should be checked by the online goods/service providers.

Interface with payment gateways is yet another challenge in online transactions. In 1995, the
EFT, a retail funds transfer system enabling customers to transfer funds from one account to
another and from one region to another, without any physical movement of instruments was
introduced. The banks were permitted to offer internet banking facilities based on the Board-
approved internet banking policy without prior RBI approval. As a step towards risk
mitigation in the large value payment systems, the RTGS was made operational by the RBI in
March 2004, which enabled settlement of transactions in real time, on a gross basis. The
RTGS System is operated by the RBI. In 2005, NEFT was introduced which was a more
secure, nation-wide retail electronic payment system to facilitate funds transfer by the bank
27
“Section 66-E of the IT Act”

47
customers, between the networked bank branches in the country. The enactment of the
Payment and Settlement Systems Act, 2007 empowered the RBI to regulate and supervise the
payment and settlement systems in the country, give authority to permit the setting
up/continuance of such systems and to call for information/data and issue directions from/to
payment system providers. The IT Act provided legal recognition for transactions carried out
by means of electronic data interchange and other means of electronic communication,
commonly known as "electronic commerce", which involve the use of alternatives to paper-
based methods of communication and storage of information. 28 Some of the initiatives taken
so far to a secured e-transaction include: The IT (Amendment) Act 2008, RBI's guidelines on
Mobile Banking and pre-paid Value Cards, Guidelines on Internet Banking and Mobile
banking guidelines. Essentially, the IT Act has laid the foundation for strengthening cyber
security and data protection in India with introduction of section 43A that mandates body
corporate to implement "reasonable security practices" for protecting "sensitive personal
information".29 The IT Act formally introduces the concept of data protection in Indian law,
ushers in the concept of "sensitive personal information" and provides for fixation of liability
on a body corporate to preserve and protect such sensitive personal information. 30 It also
provides for civil and criminal liability for failure to protect personal data and information. 31
Further, the RBI has mandated a system of providing additional authentication based on
information encrypted on the cards but not visible for all online transactions. Banks have also
to put in place alert systems to keep a tab on online activity. Since an e-commerce website
relies on an online mode of payment, several requirements imposed by the RBI do impact
them but essentially the payment gateways. However, while engaging such payment
gateways the contractual obligations on data protection and usage should be clearly defined.

3.7 Kinds of Information covered under the Data Protection Rules

There are basically two categories of information which are covered under the IT Act which
need to be considered with respect to data protection.
28
“For details regarding banking regulations and its evolution, please see our bulletin of September 2008
- http://www.psalegal.com/upload/publication/assocFile/IPR&TECHNOLOGYBULLETIN-ISSUEIX.pdf.”
29
 “For details regarding the risk involved in e-transaction and steps taken by RBI, please see our bulletin of
August 2009 - http://www.psalegal.com/upload/publication/assocFile/BANKING-LAWS-BULLETIN-ISSUE-
II_1288782887.pdf.”
30
“Section 43A of the IT Act.”
31
“Refer to sections 43A and 72A, newly introduced. For details please see our bulletin of December 2010
- http://www.psalegal.com/upload/publication/assocFile/ENewslineDecember2010.pdf.”

48
i. Personal information (“PI”) which is defined as any information that relates to a
natural person, which, either directly or indirectly, in combination with other
information available or likely to be available with a body corporate, is capable of
identifying such person.

ii. Sensitive personal data or information (“SPDI”) which is defined means such PI of a
person which consists of

a. password;

b. financial information such as Bank account or credit card or debit card or other
payment instrument details ;

c. physical, physiological and mental health condition;

d. sexual orientation;

e. medical records and history;

f. Biometric information.

The Data Protection Rules, inter alia, set out compliances which to protect SPDI in the
electronic medium by a corporate entity which possess, deals with or handles such SPDI such
as:

i. The need to have a privacy policy in accordance with the parameters set out in the
Data Protection Rules;

ii. The need to obtain consent in a specific manner from the provider of SPDI;

iii. The need to provide an opt out option to the provider of SPDI;

iv. The need to maintain reasonable security practices and procedures in accordance with
the requirements of the Data Protection Rules (discussed below).

3.7.1 Potential Liability under the Data Protection Rules

49
The IT Act prescribes penalties for a wrongful disclosure of PI by way of imprisonment up to
three years and/ or a fine up to INR 5 lakhs. The IT Act also prescribes compensation to be
awarded by companies that are negligent in the protection of SPDI of any person.

3.8 Security of Systems

Security over the Internet is of immense importance to promote e-commerce. Since e-

commerce companies keep sensitive information (including SPDI) on their servers, e-
commerce companies must ensure that they have adequate security measures to safeguard
their systems from any unauthorized intrusion. A company could face security threats
externally as well as internally. Externally, the company could face problems from hackers,
viruses and trojan horses. Internally, the company must ensure security against its technical
staff and employees.

There are enormous possibilities of trade mark, copyright or patent infringements in online
medium. E-commerce websites are designed and made by other parties and often the content
is also created by third parties. Unless the agreements between the parties specifically provide
the IP rights, there can be serious ownership issues of IPR. Any usage of third party IPR
should have valid approvals in place. In interactive websites, the disclaimer and IPR policy
should clearly spell out these issues and goods/service providers should also keep a watchful
eye on the usage of their websites regularly. Domain names have trade mark protection and
deceptively similar domain names can give rise to disputes. In Satyam Infoway Ltd v. Sifynet
Solutions Pvt Ltd., the Supreme Court had held that "a domain name may pertain to the
provision of services within the meaning of section 2(z) of the Trade Marks Act."

3.9 Efficient delivery system

It is important to always keep consumer protection issues in consideration in e-commerce.

The Consumer Protection Act, 1986 ("CPA") governs the relationship between consumers
and goods & service providers and there are no specific provisions related to online
transactions. Liability for a goods/service provider arises when there is "deficiency in
service" or "defect in goods" or occurrence of "unfair trade practice". The CPA specifically
excludes from within scope any service rendered free of cost. So, if only the actual sale is
taking place in the online medium, the users will be considered as consumers under the CPA.
The goods/service providers may be asked to remove defects/deficiencies, replace the goods,

50
return the price already paid, compensate and discontinue the unfair trade practice or the
restrictive trade practice and not repeat them.

Under the Information Technology (Intermediaries Guidelines) Rules, 2011, the

intermediaries have the obligation to publish the rules and regulations, privacy policy and
user agreement for access or usage of the intermediary's computer resource by any person.
Such rules and regulations must inform the users of computer resource not to host, display,
upload, modify, publish, transmit, update or share certain prescribed categories of prohibited
information. Also, the intermediary must not knowingly host or publish any prohibited
information and if done should remove them within 36 hours of its knowledge. In Consim
Info Pvt. Ltd v. Google India Pvt. Ltd.32, the Delhi Court recognized that no injunctive relief
could be granted to Consim since it did not pass the triple test of (i) prima facie case (ii)
balance of convenience and (iii) irreparable hardship but here the decision of the court was
greatly influenced by the fact that the trademarks in dispute were generic in nature. The court
also observed that though the intermediary, Google, cannot be made liable for infringement
arising out of a third party's actions since it is not possible to always check every
advertisement posted online; however, this observation was subject to section 3(4) of the
aforesaid Intermediaries Guidelines and Google had to act upon it within 36 hours of receipt,
failing which it may be held liable.

3.10 Advertising

Advertising is an important and legitimate means for a seller to awaken interest in his
products. For long, advertisements were regulated by the courts, government, tribunals, or
police that depended upon the nature of each case. Additionally, absence of a single
comprehensive legislation created a lot of confusion in terms of a proper code to follow by
the industry and the authority to regulate or guide the pattern of advertising. In 1985, the
Advertising Standards Council of India ("ASCI"), a non statutory tribunal, was established
that created a self regulatory mechanism of ensuring ethical advertising practices. ASCI
entertained and disposed off complaints based on its Code of Advertising Practice ("ASCI
Code"). On certain occasions, however, the ASCI orders were set aside by courts as ASCI
being a voluntary association was considered usurping the jurisdiction of courts when it
passed orders against non-members. Gradually, the ASCI Code received huge recognition
from the advertising industry. The warnings issued by ASCI to the advertisers against the
32
“2013 (54) PTC 578 (Mad)”

51
misleading advertisements were gradually being accepted by the advertisers and the
advertisements were actually stopped being aired or were modified significantly to comply
with the prescribed ASCI Code. The advertisements should make truthful and honest
representations and avoid false and misleading claims, should not be offensive to public
decency or morality, not promote products which are hazardous or harmful to society or to
individuals, particularly minors, observe fairness in competition keeping in mind consumer's
interests and avoid obscene or harmful publication and indecent representation of women.

3.11 Competition

E-commerce has already generated a lot of competition with ever increasing players and
acquisition of several old players in the market and has enabled development of new services,
new distribution channels, and greater efficiency in business activities. Creation e-hubs where
significant market share lies can lead to certain competition issues if they appear to have
developed sustainable market power resulting from network effects and/or engaging in
strategic acts to preserve or maintain their market power. Potential issues for e-commerce
players would be price fixing or tacit collusion or anti-competitive discrimination or refusal
of access to third parties. E-commerce players should refrain from collusion and excessive
pricing. Options for parties to use same web platform for different kinds of products/services
can give rise to different intermediaries and that can lead to collusive behavior. Market
transparency should be encouraged.

3.12 Conclusion

Though the Internet eliminates the need for physical contact, it does not do away with the fact
that any form of contract or transaction would have to be authenticated and in certain
instances recorded.

Different authentication technologies have evolved over a period of time for authenticating
documents and also to ensure the identity of the parties entering into online transactions.
Further in relation to an e-commerce business, processing payments forms a vital part of the
transaction and in this regard various payment systems to carry on an e-commerce business
have also developed.

Transactions on the internet, particularly consumer related transactions, often occur between
parties who have no pre-existing relationship. This may raise concerns of the person’s

52
identity and authenticity with respect to issues of the person’s capacity, authority and
legitimacy to enter the contract.

Electronic signatures may be considered as one of the methods used to determine the
authority and legitimacy of the person to authenticate an electronic record.

In fact the IT Act gives legal recognition to the authentication of any information by affixing
an electronic signature as long as it is in compliance with the manner as prescribed under the
IT Act.

Further, the IT Act also provides the regulatory framework with respect to electronic
signatures including issuance of electronic signature certificates.

In particular the IT Act provides that an electronic signature shall be deemed to be a secure
electronic signature if:

i. The signature creation data, at the time of affixing the signature, was under the
exclusive control of the signatory and no other party; and

ii. The signature creation data was stored and affixed in such exclusive manner as may
be prescribed.

E-commerce websites should lay down purchasing and payment process in sequence with
absolute clarity and regular updating/monitoring of information provided. The terms and
conditions should not be generic but specific depending upon the nature of the goods &
services offered and they should be brought to the sufficient attention of the consumers and
provide ample opportunity to read and then accept. E-commerce players should ensure
reasonable efforts to prevent unauthorized transaction. E-commerce business is in nascent
stage but the growth has been exemplary. It is crucial for e-commerce players to work
towards capacity building by training employees and alarming them against the risks
discussed above. Working and more crucially implementing the risk management policy and
strategy for overall risk mitigation of the company is critical. Constant monitoring and
evaluating the consumer behavior (like by keeping track of their footprints on their websites,
which can also serve as an evidence at a later stage) for risk assessment and taking further
initiatives for a strategic & dynamic approach to the digital economy is crucial. At the end of
the day, e-commerce is more about strategy and business management than it is about

53
technology. The online platform should not only provide innovative infrastructure but also
innovative and proprietary information structures with sufficient protections and safeguards
for its users. This will ensure the problems will remain at bay or at least the companies would
be prepared with a strategy to tackle them.

The rapid growth of e-commerce has created the need for vibrant and effective regulatory
mechanisms, which would strengthen the legal infrastructure that is crucial to the success of
e-commerce in India. It has always been the allegation that the weak cyber security laws in
India and the absence of a proper e-commerce regulatory framework is the reason for what
Indian people as well as the e-commerce industries face so many challenges in enjoying a
consumer-friendly and business-confidant e-commerce environment in India. India has no
dedicated e commerce regulatory law other than the IT Act which regulates the e commerce
business and transactions in India. So, the government should develop a legal framework for
e-commerce so that both domestic as well as international trade in India flourish, the basic
rights such as privacy, intellectual property, prevention of fraud, consumer protection etc. are
all taken care of. Legal community in India is required to the necessary expertise to guide
entrepreneurs, consumers and even courts in a manner that the fast emerging business module
is enabled to adhere to existing legislations normally applicable to business transactions in
conventional modules. Simultaneously, it should ensure that the advantages of technology are
availed of unhindered by judicious evolution of law through learned interpretation of courts
till a consensus emerges that a specialized law to govern and regulate certain aspects of e
commerce is imperative and an exclusive necessity.

CHAPTER 4

54
 AMENDMENTS IN INFORMATION TECHNOLOGY ACT
TOWARDS E-MARKETING AND ISSUES RELATING TO
THE CONSUMERS

4.1 Introduction

On 7th December 2020, the Delhi High Court directed the Centre to verify and inform
whether major e-commerce players such as Amazon, Flipkart, and Snapdeal were displaying
the ‘country of origin’ for products listed on their websites. The Department for Promotion of
Industry and Internal Trade (DPIIT) had set September 30 as the deadline for e-commerce
firms to display the ‘country of origin’ for products listed on their websites. The ‘country of
origin’ rule was inserted into the Consumer Protection (Ecommerce) Rules, 2020 33, notified
on July 23.

4.2 Provisions

The Consumer Protection (E-Commerce Rules, 2020) hereinafter referred to as the ‘Rules of
2020’ which are made applicable to (i) an e-commerce entity operating in India and also (ii)
an e-commerce entity which ‘systematically offers’ goods and services to consumers in India.
Due to the growth of e-commerce activities in India and the problem faced by the consumers,
the Government has tried to plug in the loopholes in the existing rules and regulations. These
Rules are in tune with the new Consumer Protection Act, 2019 (‘CPA’) and have addressed
issues which would ensure compliance and also deter the e-commerce companies from
indulging in unfair trade practices while protecting the rights of the consumers at the same
time.

4.2.1 Applicability

The Rules have been made applicable on the following: –

 all goods and services bought or sold over digital or electronic network;
 all e-commerce retail, including multi-channel single brand retailers and single brand
retailers in single or multiple formats; and
 all models of e-commerce.

33
“Notification dated 23.07.2020”

55
However, any natural person carrying out any activity in a personal capacity not being part of
any professional or commercial activity undertaken on a regular basis is kept outside of the
ambit of application of these rules. The Rules have expanded the ambit of the applicability of
these rules to all kinds of e-commerce entities and activities relating to a consumer.34

4.3 E-Commerce Entity Requirements

An e-commerce entity must be a company registered under the Companies Act, 1956 (1 of
1956) or the Companies Act, 2013 (18 of 2013) or a foreign company covered under clause
(42) of section 2 of the Companies Act, 2013 (18 of 2013) or an office, branch or agency
outside India owned or controlled by a person resident in India as provided in sub-clause (iii)
of clause (v) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999). By
virtue of Rule 4 only specific type of body corporates are allowed to operate in the sphere of
e-commerce entities and individuals, partnerships, proprietorships are excluded.35

Further, an important addition in the Rules of 2020 is the mandatory requirement to appoint a
nodal person or a senior designated official (resident in India) who would be responsible
compliance of the CPA as well as the Rules.36

Under the new Rules, now an e-commerce entity must provide the following information on
their platform:-

 the legal name of e-commence entity;

 principal geographic address of its headquarters and all branches;
 name and details of its website; and
 contact details, including mobile numbers of customer care and grievance officer to
help users make an informed decision.37

The entities have to establish a Grievance Redressal Mechanism which involves the
following steps:-

A Grievance Officer must be appointed to monitor the grievance redressal mechanism, and
the following details of the grievance officer must be displayed on the e-commerce platform:

34
“Rule 2”
35
“Rule 4(1)(a)”
36
“Rules 4(1)(b)”
37
“Rule 4(2)”

56
  name;
 contact details; and
 designation of such officer on the e-commerce platform.38
 Once appointed the Grievance Officer must ensure that do the following:-
 acknowledge the complaint of the consumer within 48 hours; and
 act on the complaint with 1 month from the date of receipt of the complaint.39

In the case where imported goods or services for sale are involved the following information
must be provided:-

 the name and details of such importer; or

 anyone who may be a seller on the platform40.

E-commerce entities have now been specifically barred from charging any cancellation fees
from consumers who cancel their orders after confirming purchase unless similar charges are
borne by the e-commerce entity if they cancel the purchase order unilaterally for any reason 41.
The Rules have tried to balance between the interest of the e-commerce entities and
consumers.

The e-commerce entities must record only the explicit consent of the consumers for the
purpose of purchase of any goods or services offered on the platform. It is pertinent to note
that pre-ticked checkboxes do not confirm the consent of the consumer.42 This rule is in line
with the judgment of the Hon’ble Supreme Court in K.S Puttaswamy vs. UOI43 and protects
the right to privacy of the consumer.

They must make sure to give effect to the refund requests of the consumers within a
reasonable time period as mandated by the RBI or prescribed under applicable laws44.

Under the new Rules, manipulation of price is strictly prohibited. Discrimination between
consumers of same class is also prohibited45.

38
“Rule 4(4)”
39
“Rules 4(5)”
40
“Rules 4(6)”
41
“Rules 4(8)”
42
“Rules 4(9)”
43
“(2017) 10 SCC 1”
44
“Rule 4(10)”
45
“Rule 4(11)”

57
4.4 Marketplace E-Commerce Entity

A marketplace e-commerce entity46 acting as an intermediary under the Information

Technology Act, 2000 has been provided protection under the Rules provided it complies
with sub section 2 &3 of Section 79 of the Information Technology Act and the Information
Technology (Intermediary Guidelines) Rules, 201147.

Market e-commerce entity is required to take an undertaking from its sellers that the product
description is true and correct.48

Under the rules, details must be provided about the sellers, including the name of their
business, whether registered or not, geographic address, customer care numbers, any rating,
or feedback on the platform in a clear and accessible manner to help the consumers make
informed decisions. It has been mandatory that a ticket number be provided ticket for each
complaint for consumers to help track the status of their complaint, information pertaining to
refund, return, exchange, warranty & guarantee, delivery and shipment, modes of payment,
grievance redressal mechanism, and any other information required by consumers to make
informed decisions.

The Rules lay down that the nature of relationship with sellers must be displayed in the terms
& conditions on the platform. Further, a record must be maintained of all the sellers,
including those previously removed or restricted to offer goods or services on the platform to
enable consumers to make informed decisions.

4.5 Sellers on the Marketplace

Rule 6 lays down the responsibilities of sellers49 in an e-commerce transaction. A seller

offering goods or services on e-commerce entities, shall strictly refrain from impersonating as
a consumer to post reviews about goods or services, or misrepresenting the quality of the
features of any goods or services50. A seller cannot refuse to take back goods or withdraw or
46
“Defined in Rule 3(g)”
47
“Rule 5(1)”
48
“Rule 5(2)”
49
“Defined under Rule 3(k)”
50
“Rule 6(2)”

58
discontinue services purchased or agreed to be purchased, or refuse to refund paid amount, if
goods or services are defective, deficient or spurious, or do not conform to the advertised
features, or agreed delivery schedule51. A longstanding demand of the consumer protection
groups has been addressed regarding posting of fake reviews. These rules would ensure that
the sellers don’t indulge in Unfair Trade Practices, however, there is still scope for the seller
to engage third parties and post fake/ misleading reviews about the products.

A seller needs to have prior written contracts with the marketplace e-commerce entity
through which it intends to sell its goods or services 52. Now it is mandatory that a grievance
officer for redressal of consumer’s complaint is appointed by the seller and the seller has to
be ensured that the officer acknowledges the complaint within 48 hours from its receipt and
acts upon it within 1 month from the date of receipt of the complaint.53

Another concerning issue regarding misleading advertisements has been addressed in the new
rules. Advertisements of the goods or services offered are required to be consistent with the
actual characteristics of such goods or services54. Legal name, geographic address of
headquarters and all branches, the name and details of the website, contact details, including
customer care number, and applicable GSTIN and PAN details to the marketplace e-
commerce entity must be displayed on the platform.55

The seller needs to disclose and display through the marketplace e-commerce entity all
contractual information, total price of the goods or services along with breakup, postage &
handling charges, conveyance charges, and applicable taxes. The seller needs to disclose all
the mandatory notices, relevant details about the goods or services, including country of
origin and expiry date of the goods or services, accurate information related to terms of
exchange, returns, and refunds, including cost of return shipping, and any relevant guarantees
or warranties applicable on the goods or services.56

4.6 Inventory E-Commerce Entity

51
“Rule 6(3)”
52
“Rule 6(4)(a)”
53
“Rule 6(4)(b)”
54
“Rule 6(4)(c)”
55
“Rule 6(4)(d)”
56
“Rule 6(5)”

59
Rule 7 deals with duties and liabilities of inventory e-commerce entities 57 which are similar to
those of sellers on the marketplace. This rule ensures that there is consistency maintained on
the information which is provided to the consumer by the e-commerce entity, the sellers as
well as inventory holders.

Contravention

Rule 8 states that the provisions of the Consumer Protection Act, 2019 (35 of 2019) shall
apply for any violation of the provisions of these rules.

4.7 Conclusion

It was in 1995 that the Internet was first launched in India, through dialup connections. Ever
since then, technology has just been on an evolutionary ascent with online B2B online portals
appearing from 1996 to 2007, when the number of players in the e-tailing segment saw a
significant rise. E-commerce has made our lives simpler by making it possible to get what we
need with a few clicks from the comfort of our homes. The Organization for Economic
Cooperation and Development (OECD) defines E-Commerce as a new way of conducting
business, qualifying it as business occurring over networks that use non-proprietary protocols
that are established through an open standard-setting process such as the Internet. Under the
FDI Policy, ‘e-commerce’ comprises products, both digital and physical, and services traded
on digital and electronic networks. In simple terms, e-commerce is a means of conducting
business electronically rather than conventional physical means. This includes all retail
activities conducted over the internet such as purchasing goods, availing services, delivery,
payment facilitation as well as supply chain and services management.

E-commerce is considered a game-changer for the Indian economy and the future of “Digital
India”. The success of big players in the Indian market during the Internet Age depended on
their ability to adapt and evolve with the times. While few successfully changed the tides to
their favour by setting up online businesses, many failed to keep up and thereby declined.
Presently, the key stakeholders in e-commerce include the government, travel services
(airlines, Indian Rail, bus operators) retailers/manufacturers, entertainment service providers,
and many others; enablers of the e-commerce sector such as logistics providers, financial
intermediaries, social networking sites, internet service providers call centres, network
service providers, etc. help facilitate transactions online. Government Initiatives such as
57
“Defined under Rule 3(f)”

60
Startup India, Digital India, allocation of funds for the BharatNet Project, promotion of
‘cashless economy’, the launching of the Unified Payment Interface by the RBI and the
National Payment Corporation of India have collectively contributed to the growth and
success of the e-commerce sector in the country. Other factors such as constant advertisement
of online services leading to increased awareness of the availability of such services have
resulted in a greater number of consumers. The rules are in the right direction to safeguard
the interests of the Consumers, however, their implementation would be the biggest challenge
for the government.

CHAPTER 5

JUDICIAL TRENDS TOWARDS E-MARKETING IN INDIA

5.1 Introduction

61
India is witnessing a digital revolution with internet becoming an integral part of its
population and availability of internet in the mobile phones. With the decrease in the prices
for using internet, change in lifestyle in urban areas and the convenience that internet has
brought has supported this revolution. It’s an undisputed fact that E-Commerce has become a
part of our daily life. E-Commerce, as the name suggests, is the practice of buying and selling
goods and services through online consumer services on the internet. The ‘e’ used before the
word ‘commerce’ is a shortened form of ‘electronic’. The effectiveness of E-Commerce is
based on electronically made contracts known as E-Contracts. Although E-Contracts are
legalized by Information Technology Act, 2000 but still majority feels insecure while dealing
online. The reason being lack of transparency in the terms & conditions attached to the
contract and the jurisdiction in case of a dispute that may arise during the pendency of a
transaction with an offshore site.

The term E-Commerce stands for ‘Electronic Commerce’. There is no standard definition for
the term ecommerce as such, it is said to be used in the sense of denoting a mode of
conducting business through electronic means unlike through conventional physical means.
Such electronic means include ‘click & buy’ methods using computers as well as ‘m-
commerce’ which make use of various mobile devices or smart phones.

The concept of E-commerce not only includes selling and purchasing of goods online but also
its delivery, payments, supply chain and service managements. Example: An individual
visits retail store and purchases merchandise not currently in stock from a computer-enabled
kiosk located inside the shop. An e-commerce transaction since agreement occurred over
computer-mediated networks.

Electronic commerce covers all business conducted by means of computer networks. In

recent years, advances in telecommunications and computer technologies have made
computer networks a fundamental part of the economic infrastructure. Progressively
companies are facilitating transactions over web. There has been incredible competition to
target each and every computer owner, connected to the Web.

Thus, the business activity conducted through electronic means falls within e-commerce.
Though there is no specific definition provided in any statute, it encompasses all business
conducted by computer networks, be it B2B, B2C, C2C, C2B or B2B2C. The services that
are offered does not begin or end with providing an online platform but involves efficient

62
delivery system, proper payment facilitation and an effective supply chain and service
management. So, the business is not simple as it may seem and also involves a lot of legal
issues.

5.2 Legal validity of E-transaction

Electronic contracts are governed by the basic principles elucidated in the Indian Contract
Act, 1872,which mandates that a valid contract should have been entered with a free consent
and for a lawful consideration between two adults.6 It also finds recognition under section
10A of the Information Technology Act, 2000 that provides validity to e-contracts.
Accordingly, both Indian Contract Act, 1872 and Information Technology Act,2000 needs to
be read in conjunction to understand and provide legal validity to e-contracts. Further,
provisions of the Evidence Act, 1872 also provides that the evidence maybe in electronic
form. The Supreme Court in Trimex International FZE Ltd. Dubai v. Vedanta58 E-
Commerce in India, Legal, Tax and Regulatory Analysis, August 2013, The Indian Contract
Act 1872, Section 10 The Evidence Act 1872, Section recognizing the validity of e-
transaction has held that e-mails exchanges between parties regarding mutual obligations
constitute a contract. The Indian Contract Act, 2000 vis-à-vis E-transactions The ICA, 1872
provides that where a person who is in a position to dominate the will of another, enters into a
contract with him, and the transaction appears, on the face of it or on evidence adduced, to
be[unconscionable, the burden of proving that such contract was not induced by undue
influence shall lie upon the person in a position to dominate the will of the other.
Consequently, in cases of dispute over e contracts the entity carrying out the e-commerce will
have the onus to establish that there was no undue influence. Further, the Act also provides
that the consideration or object of any agreement is unlawful when it is forbidden by law, or
is of such a nature that if permitted, it would defeat the provisions of any law; or is
fraudulent, or involves or implies injury to the person or property of another, or the Court
regards it as immoral or opposed to public policy.10 Thus, the entity is also required to keep
these prerequisites in mind while entering into an E-transaction.

Example: A consumer visits a bookstore and inquires about the availability of an out-of-stock
book. Bookstore employee downloads a digital copy of the book and prints it along with
cover. It is not an ecommerce retail transaction since agreement to purchase did not occur

58
“2010 (1) SCALE 574”

63
over an electronic network. However, the right to access the digital archived copy is an e-
commerce service transaction.

The Supreme Court of India, recognizing the distinction between ‘postal rules’ and ‘receipt
rules’ as elaborated in Bhagwandas v. Girdharilal59, following the English decision in
Entores Ltd v. Miles Far East Corporation60, had held that Section 4 is applicable only in
non-instantaneous forms of communication and does not apply to instantaneous forms of
communication. Therefore, it may be noted that this method is useful only for non-
instantaneous forms of communication like contracts concluded by E-mail and may be
inapplicable in instantaneous forms like ‘web click’ contracts. In the case of instantaneous
forms of communication, it has been held that a contract is formed when the offeror receives
the acceptance. Therefore, in the virtual world, an offer or acceptance is complete when the
addressee is in receipt of the electronic record as defined in Section 13(2) of the Information
Technology Act, 2000.

5.3 E-Commerce Dispute

Disputes are usually settled within the physical territory where one or both of the parties are
located. However, with an online enterprise, customers could be located anywhere in the
World. Now the biggest question that comes to one’s mind is that how does an enterprise
cope up with such broad exposure. To verify the consumer's location is virtually impossible.
A consumer may even be able to pay for services anonymously using the digital equivalent of
cash e.g. e-Cash. It is pertinent to note that where goods require a physical delivery, an online
enterprise can restrict its customer base to those jurisdictions where it is delivered but with
digital goods and services that are delivered online, this is almost impossible, and the
enterprise may have to rely on the truthfulness of the customer's information regarding their
location.

Example: A motor vehicle manufacturer makes several online transactions such as buying
tires, glass for windscreens, and rubber hoses for its vehicles. If the supplier fails to perform
its obligation within the stipulated time limit this may lead to an e-commerce dispute.

5.3.1 Types of E-commerce Dispute

59
“Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas and Co., AIR 1966 SC 543”
60
“[1955] 2 QB 327”

64
Electronic commerce brings both comforts and discomforts to its users. The comforts include
on the spot sales and purchase, competitive costs, convenience, saving of time, etc. The
discomforts include frauds and cyber crimes committed against e-commerce users. At times
there are disagreements and dissatisfactions as well among buyers and purchasers that cannot
be resolved using traditional litigation methods. Thus, it can be said that disputes are
inevitable in the course of the life of a business, whether online or offline. The business
disputes which the enterprise may encounter in e-commerce are:

5.3.2 Contractual disputes

Disputes that arise out of some non-fulfillment of any contractual obligation are said to be
known as Contractual Disputes. There are numerous kinds of contractual disputes existing in
the corporate arena, some of which are:

5.3.3 Disputes between the enterprise and the Internet Service Provider (ISP)

These are the dispute that arises between the enterprise and the Internet Service Provider
(ISP) or web-hosting services provider, including disagreements over interruptions in service,
breach in data security etc.

Example: if A, an ISP, contracts with an enterprise, B, to provide an uninterrupted web

hosting service to B. But A fails to provide the same. This may lead to a dispute between A
and B.

Business-to-business (B2B) disputes

These kinds of disputes usually take place between the enterprise and its suppliers such as
non performance of contractual obligations, misrepresentations, and complaints from
customers regarding services provided by suppliers. Example: an automobile manufacturer
makes several B2B transactions such as buying tires, glass for windscreens, and rubber hoses
for its vehicles. If the supplier fails to perform its obligation within the stipulated time limit
this may lead to a B2B dispute.

Business-to-consumer (B2C) disputes

These disputes are common between the enterprise and its customers such as non-payment
for goods or services, non-performance of contractual obligations, poor performance of

65
contract, misrepresentations, breach of the privacy policy, and breach of security of
confidential information. It is between the enterprise and its customers that lies the greatest
possible scope for disputes. Example: The final transaction (in the previous example), a
finished vehicle sold to the consumer, is a single (B2C) transaction. If the consumer finds any
defect in the vehicle then this may lead to a B2C dispute.

5.3.4 Non-contractual disputes

Non-contractual disputes are basically those disputes that arise due to non-observance of any
statutory obligation on part of the parties to the transaction. These are the common kinds of
noncontractual disputes that may arise in an online enterprise.

Dispute over Copyright

The enterprise might be liable for copyright infringement if it uses copyrighted material in
excess of fair use, and without permission.61 Example: An enterprise provides an online
English- Hindi dictionary Facility to the users. Another enterprise subsequently published
another online English Hindi dictionary Facility. The former enterprise can sue the letter for
infringement of copyright under section 51 of the Copyright Act, 1957.

Failure in Data protection

The enterprise may be liable for sharing or revealing confidential data on customers, as
discussed in the segment on Privacy.62 Example: if the services provided by an enterprise are
of such a nature that the law mandates that it is the duty of the enterprise to provide data
protection to the customers. Failure in observing such a mandate may give rise to a liability
under the IT Act, 2000.

Right of free expression

The enterprise may be subject to defamation suits for defamatory material posted online.

61
“Under the provisions of Copyright Act, 1957”
62
“Under the provisions of IT Act, 2000”

66
Example: if an enterprise publishes any defamatory statement on its website concerning a
person of repute, Mr. X. Mr. X has all the right to sue the enterprise for defamation under the
provisions of IPC, 1908.

5.3.5 Jurisdiction over E-Commerce Disputes

The traditional approach to jurisdiction invites a court to ask whether it has the territorial,
pecuniary, or subject matter jurisdiction to entertain the case brought before it. With the
internet, the question of ‘territorial’ jurisdiction gets complicated largely on account of the
fact that the internet is borderless.

Therefore, while there are no borders between one region and the other within a country there
are no borders even between countries.63

5.3.6 Basis of Jurisdiction under Indian Law

E-commerce websites operating in India are required to follow many laws of India including
the Information Technology Act, 2000. As per the IT Act, 2000 these e-commerce websites
operating in India are Internet intermediaries and they are required to comply with cyber law
due diligence requirements as well.64

Further, 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.

5.3.7 Indian Statutes and E-commerce Jurisdiction

In short, the highly profitable e-commerce segment of India must be explored only after
complying with the laws governing the respective e-commerce segment. There is no single
set of laws and regulations that govern all e-commerce segments and every e-commerce
segment is governed by different laws.

5.4 Information Technology Act, 2000 vis-à-vis E-Commerce

The objectives of the Information Technology Act, as outlined in the preamble, are to provide
legal recognition for E-commerce transactions, facilitate Electronic Governance and to
63
“Justice S. Muralidhar , Jurisdictional Issues in Cyberspace, VOLUME 6, The Indian Journal of Law and
Technology, 2010”
64
“The Information Technology (Intermediaries guidelines) Rules 2011, Rule 3”

67
amend the Indian Penal Code, 1860; Indian Evidence Act, 1872; the Bankers’ Book Evidence
Act 1891 and the Reserve Bank of India Act, 1934. The Act also establishes a regulatory
framework for cyber laws and lays down punishment regimes for different cyber crimes and
offences.

The provisions of this Act enables the act applicable also to those offences or contraventions
committed outside India by any person irrespective of his nationality if the act or conduct
constituting the offence or contravention involves a computer, computer system or computer
network located in India.65

Example: Mr. A, a person residing in America, provides an online service to the consumers
all over the world. If Mr. A commits an offence under the IT Act, 2000, then also he can be
sued in Indian Courts.

The IT Act 2000 attempts to change outdated laws and provides ways to deal with cyber
crimes. Let’s have an overview of the law where it takes a firm stand and has got successful
in the reason for which it was framed :

1. The E-commerce industry carries out its business via transactions and
communications done through electronic records. It thus becomes essential that such
transactions be made legal. Keeping this point in the consideration, the IT Act 2000
empowers the government departments to accept filing, creating and retention of
official documents in the digital format. The Act also puts forward the proposal for
setting up the legal framework essential for the authentication and origin of electronic
records / communications through digital signature.66

2. The Act legalizes the e-mail and gives it the status of being valid form of carrying out
communication in India. This implies that e-mails can be duly produced and approved
in a court of law, thus can be a regarded as substantial document to carry out legal
proceedings.67

Example: If, Mr. A offers Mr. B to provide transport services via e-mail and Mr. B
subsequently in his reply affirms the same via e-mail itself, then this can be considered as
valid means of carrying out communication.

65
“The IT Act, 2000, Section 75”
66
“The IT Act, 2000, Section 6”
67
“Ibid, Section 10A”

68
3. The act also talks about digital signatures and digital records. These have been also
awarded the status of being legal and valid means that can form strong basis for
launching litigation in a court of law. It invites the corporate companies in the
business of being Certifying Authorities for issuing secure Digital Signatures
Certificates.68

Example: Mr. A, enters into an online contract (along with a attached Digital Signatures
Certificate) with Mr. B to provide transport services to Mr. B. if Mr. A makes a default in
providing such facility to Mr. B, then in such a case Mr. B can produce such document in
court of law.

5.5 The Indian Penal Code, 1908

The Act provides for punishment of offences committed beyond the four walls of India, but
which by law may be tried within, India. It states that any person liable, by any Indian law to
be tried for an offence committed beyond India shall be dealt with according to the provisions
of this Code for any act committed beyond India in the same manner as if such act had been
committed within India.69

There does not seem too much jurisprudence in India on the issue of jurisdiction in cases of
e-commerce. However there are some instances where in the courts had in the preliminary
stages assumed jurisdiction over a matter.

Example: In the case of SMC Pneumatics (India) Pvt. Ltd. v. Jogesh Kwatra70, the Delhi
High Court assumed jurisdiction where a corporate reputation was being defamed through e-
mails.

Further, the Act also provides for extension of the Code to extra-territorial offences. The
provisions of this Code apply also to any offence committed by any person in any place
without and beyond India committing offence targeting a computer resource located in India.
It further defines the word “offence” includes every act committed outside India which, if
committed in India, would be punishable under this Code.71

68
“Ibid, Section 3A, section 5 & section 10”
69
“The IPC, 1860, Section 3”
70
“Suit No. 1279/2001”
71
“The IPC, 1860, section 4”

69
Example: Mr. X, a person residing in America, provides an online service to the consumers
all over the world. If Mr. X commits an offence targeting a computer resource located in
India under the IPC, 1860, then he can be held liable under the Act.

5.6 The Civil Procedure Code, 1908

The Act gives the discretion to the plaintiff to file a suit for compensation for wrongs to
person or movables, if the wrong was done within the local limits of the jurisdiction of one
Court and the defendant resides, or carries on business, or personally works for gain, within
the local limits of the jurisdiction of another Court, the suit may be instituted at the option of
the plaintiff in either of the said Courts.72

Examples: Mr. A, residing in Delhi, publishes on his website in Calcutta statements

defamatory of B. B may sue A either in Calcutta or in Delhi.

The Act further provides that every suit shall be instituted in Court within the local limits of
whose jurisdiction the any of the defendant resides or the cause of action arises. 73 It further
explains that a corporation shall be deemed to carry on business at its sole or principal office
in India or, in respect of any cause of action arising at any place where it has also a
subordinate office, at such place.74

Example: A is a tradesman who updates his website in Calcutta; B carries on business in

Delhi. B buys goods of A, online and requests A to deliver them to the East Indian Railway
Company. A delivers the goods accordingly in Calcutta. A may sue B for the price of the
goods either in Calcutta, where the cause of action has arisen or in Delhi, where B carries on
business.

Furthermore, it also makes a foreign judgment to be conclusive as to any matter thereby

directly adjudicated upon between the same parties or between parties under whom they or
any of them claim litigating under the same title except under certain specified conditions. 75
Talking about the presumption as to foreign judgments the provisions of the Act states that
the Court shall presume upon the production of any document purporting to be a certified
copy of a foreign judgment that such judgment was pronounced by a Court of competent

72
“The CPC,1908, Section 19”
73
“Ibid, Section 20”
74
“Ibid”
75
“The CPC, 1908, section 13”

70
jurisdiction, unless the contrary appears on the record; but such presumption may be
displaced by proving want of jurisdiction.76

Example: A is a tradesman who maintains his website from USA; B is a resident of India. B
buys goods of A, online and requests A to deliver them to his address in India. A, fails to
deliver the goods on time, B suffers a heavy loss. B sued A in an American Court, court
decided in favor of B orders A to compensate B for the same. B filed a petition in Delhi HC
for the enforcement of the same. The Delhi HC will consider the American Judgment as a
conclusive as to any matter thereby.

With the growth of e-commerce and commercial activity over the World Wide Web, it has
become possible for business to be conducted across the globe without actual presence in
every place. The present case, inter alia, involves the question of jurisdiction in such a
situation.77

In Nehring v. S.S. M/V Point Vail 78, the court held that a valid in rem maritime claim carries
the right to satisfaction from the vessel, since the claim constitutes a lien. By contrast, an in
personam maritime claim carries no such right. Process in rem is founded on a right in the
thing, and the object of the process is to obtain the thing itself, or a satisfaction out of it, for
some claim resting on a real or quasi proprietary right in it.

The phrase in rem denotes the compass, and not the subject of the right. It denotes that the
right in question avails against persons generally; and not that the right in question is a right
over a thing… The phrase in personam is an elliptical or abridged expression for “in
personam certam sive determination”. Like the phrase in rem, it denotes the compass of the
right. It denotes that the right avails exclusively against a determinate person or against
determinate persons.79

The Apex Court in Modi Entertainment Network and anr v. W.S.G. Cricket Pvt. Ltd. 80 held
that It is a common ground that the courts in India have power to issue anti-suit injunction to
a party over whom it has personal jurisdiction, in an appropriate case. This is because courts
of equity exercise jurisdiction in personam. However, having regard to the rule of comity,
76
“Ibid, section 14”
77
“(India TV) Independent News vs. India Broadcast Live and Ors , MIPR 2007 (2) 396, 2007 (35) PTC 177
Del. Para 1”
78
“901 F.2d 1044 (11th Cir. Fla. 1990)”
79
“Austin, cited in Stone, 1968 p151”
80
“AIR 2003 SC 1177”

71
this power will be exercised sparingly because such an injunction though directed against a
person, in effect causes interference in the exercise of jurisdiction by another court.

5.7 E-Commerce cases in India

In Casio India Co. Ltd V. Ashita Tele Systems Pvt Ltd 81, Delhi High Court held that once a
web site can be accessed from Delhi, it is enough to invoke the territorial jurisdiction of the
Court. It is further held in India TV Independent News Service Ptv Ltd V. India Broadcast
Live LLC82, that the mere fact that a website is accessible in a particular place may not itself
be sufficient for the courts of that place to exercise personal jurisdiction over the owners of
the website. However, where the website is not merely passive but it is interactive permitting
the browsers to not only access the contents thereof but also to subscribe to the services
provided by the owners, then the position would be different.

In National Association of Software and Service Companies vs. Ajay Sood & Others 83,
decided by Delhi High Court in 2005, the defendants were operating a placement agency
involved in `head-hunting' and recruitment. In order to obtain personal data which they could
use for head-hunting, the defendants composed and sent emails to third parties in
NASSCOM's name. Court granted Injunction and Rs. 16 lakhs as damages.

Delhi High Court in SMC Pneumatics (India) Private Limited v. Jogesh Kwatra 84 granted an
injunction and restrained the employee from sending, publishing and transmitting emails
which are defamatory or derogatory to the plaintiffs.

In Syed Asifuddin & Ors V State of Andhra Pradesh & another 85 -Employees of a
completing mobile services company lured the customers of the above company to alter /
tamper with the special (locking) computer program / technology so that the hand-set can be
used with the competing mobile services. Held: such tampering is an offence u/s 65 of IT Act
as well as Copyright infringement u/s 63 of Copyrights Act.

In Casio India Co. Limited v. Ashita Tele Systems Pvt. Limited 86 was a passing off action
where the defendant was carrying on business from Bombay. The defendant had managed to
81
“2003 27 PTC 265 Delhi”
82
“2007 35 PTC 177 Delhi”
83
“119 (2005) DLT 596, 2005 (30) PTC 437 Del”
84
“Being Suit No. 1279/2001”
85
“2005 CrLJ4314 (AP)”
86
“2003 (27) P.T.C. 265 (Del.) (India), overruled by Banyan Tree Holding (P) Limited v. A. Murali Krishna
Reddy, CS(OS) 894/2008 (High Court of Delhi, 23rd November 2009) (India).”

72
get a registration of domain name www.casioindia.com and defendant no. 2 was the Registrar
with whom the domain name had been registered. The plaintiff, on the other hand, claimed to
be a 100% subsidiary of Casio Computer Ltd., Japan (Casio Japan), which was the registered
owner of the trade mark ‘Casio’ in India used for a large number of electronic and other
products. He had registered a large number of domain names in India like
‘CasioIndiaCompany.com’, ‘CasioIndia.org’, ‘CasioIndia.net’, etc. Defendant No. 1 had
obtained the above domain names during the time when it held a distributorship agreement
with the plaintiff. It was held by the learned single Judge after referring to the decisions in
Rediff Communication Ltd. v. Cyber Booth87 and Dow Jones & Co. Inc. v. Gutnick 88 that
“once access to the impugned domain name website could be had from anywhere else, the
jurisdiction in such matters cannot be confined to the territorial limits of the residence of the
defendant.” According to the learned single Judge, since a mere likelihood of deception,
whereby an average person is likely to be deceived or confused was sufficient to entertain an
action for passing off, it was not at all required to be proved that “any actual deception took
place at Delhi. Accordingly, the fact that the website of Defendant No. 1 can be accessed
from Delhi is sufficient to invoke the territorial jurisdiction of this Court.”

In Banyan Tree Holding (P) Limited v. A. Murali Krishna Reddy 89 Delhi HC overuling its
prior Caiso judgment held that for the purposes of a passing off action, or an infringement
action where the plaintiff is not carrying on business within the jurisdiction of a court, and in
the absence of a long-arm statute, in order to satisfy the forum court that it has jurisdiction to
entertain the suit, the plaintiff would have to show that the defendant ‘purposefully availed’
itself of the jurisdiction of the forum court. For this it would have to be prima facie shown
that the nature of the activity indulged in by the defendant by the use of the website was with
an intention to conclude a commercial transaction with the website user and that the specific
targeting of the forum state by the defendant resulted in an injury or harm to the plaintiff
within the forum state.

Contract law does not, as a general rule, set any requirements for the form of a contract in
order for a contract to be valid. Both oral and written contracts are legally valid. Only certain
types of contract are required to be made in writing. In contract law, entering into an
electronic contract is considered equivalent to entering into a written contract. This means

87
“A.I.R. 2000 Bom 27 (India)”
88
“9 (2002) H.C.A. 56 (Austl.)”
89
“2 CS (OS) 894/2008 (High Court of Delhi, 23rd November 2009) (India)”

73
that even an offer sent by e-mail and an approval received in response are considered a
legally valid contract that binds the parties. The terms of such a contract are based on the e-
mail correspondence between the parties and on the laws applicable to the type of transaction.

5.8.1 Clickwrap

The term “clickwrap” refers to agreements that obtain a user’s affirmative acceptance
electronically. You see clickwrap contracting virtually every time you install a piece of
software. During the installation, you are usually presented with check boxes to either
“accept the terms of the License Agreement” or “not accept the terms of the License
Agreement” along with a link to view the text of the end-user license agreement.

But, the use of clickwraps is not limited to software. They are often used for
acknowledgements of assent to contracts for online services, too. In those cases, the text
usually invites the user to click to accept the terms of a service agreement covering the online
offering.

Courts have treated clickwrap agreements as valid and enforceable contracts.

Rudder v. Microsoft Corporation90:-

The plaintiffs commenced a class action lawsuit alleging breach by Microsoft of certain
payment related terms of Microsoft’s MSN Member Agreement. The Member Agreement
was an on-line “click-wrap” agreement that required each prospective member to scroll down
through several pages of terms and conditions and then indicate their agreement to the terms
by clicking an “I Agree” button before being provided with access to the services. Although
the plaintiffs wished to rely on several terms of the Member Agreement, in bringing the
action the plaintiff’s disputed the choice of law and forum selection clauses that the defendant
Microsoft sought to enforce. The plaintiffs asserted that because not all of the Member
Agreement was visible at one time they did not receive adequate notice of such provisions
and that as a consequence they were not enforceable. The court determined that the Member
Agreement was enforceable stating that scrolling through several pages was akin to having to
turn through several pages of a multi-page paper contract and to not uphold the agreement
“would lead to chaos in the marketplace, render ineffectual electronic commerce and
undermine the integrity of any agreement entered into through this medium”

90
“[1999] OJ No 3778 (Sup Ct J)”

74
5.8.2 Adoption of specific rules for E-contracting

The concept of contracts being entered via electronic means has been duly acknowledged in
the Indian Legal System. The definition of “evidence” as provided under Section 32 of the
Evidence Act includes “all documents including electronic records produced for the
inspection of the court.” Further, Section 47A91 of the Evidence Act stipulates that when the
Court has to form an opinion as to the electronic signature of any person, the opinion of the
Certifying Authority which has issued the electronic Signature Certificate is a relevant fact,
and Section 85B92 of the Evidence Act stipulates that unless the contrary is proved, the Court
shall presume that-

 The secure electronic record hasn’t been modified since the specific point of time to
which the secure status relates.

 The secure digital signature shall be affixed by the subscriber for signature or
approval of the electronic record.

Delhi High Court in the case of Societe Des Products Nestle S.A and Anr v. Essar
Industries and Ors.93 led to the immediate introduction of Section 65A 94 and 65B95 in the
Indian Evidence Act of 1872 relating to the admissibility of computer generated in a practical
way to eliminate the challenges to electronic evidence.

Section 10-A96 of the Information Technology Act, 2000 (herein; IT Act’2000) says “Where
in a contract formation, the communication of proposals, the acceptance of proposals, the
revocation of proposals and acceptances, as the case may be, are expressed in electronic
form, such contract shall not be deemed to be unenforceable solely on the ground that such
electronic means of form was used for that purpose”.

Section 1397 of IT Act’ 2000, read with section 4 98 of the ICA’ 1872, provides that acceptance
is binding on the offeror when acceptance is outside the control of the originator, and for

91
“Evidence Act § 47A (1872)”
92
“Evidence Act § 85B (1872)”
93
“2006 (33) PTC 469 Del.”
94
“Evidence Act § 65A (1872)”
95
“Evidence Act § 65B (1872)”
96
“Information Technology Act §10 (2000)”
97
“Information Technology Act §13 (2000) ”
98
“Indian Contract Act §4 (1872) ”

75
offeree when the acceptance enters the information system of the offeror. 99 It has been noted
that these rules apply only to non-instantaneous forms of communication considered to be e-
mail.100 For instantaneous forms of communication, such as ‘web click’ contracts the contract
is concluded when the addressee is in receipt of the acceptance. In the case of contract
formation through the exchange of e-mails, the risk of non-delivery lies with the offeror- he
will be bound by acceptance once it has been sent, whether or not it has received acceptance;
whereas, the offeree will only be bound if the message enters the information system of the
offeror.

The risk of non-delivery may be shifted through acknowledgements of receipt, Section 12 101
of the IT Act, deals with the default in acknowledgement of receipt process and it can be
inferred that an acknowledgement may be given by any communication by the addressee or
any conduct sufficient to indicate to the originator that the electronic record has been
received.

Receipt acknowledgment does not change the binding nature of the receipt of electronic
records, but where the originator has stipulated that the electronic record is binding only after
receipt has been received by her of an acknowledgment of such electronic record, the
electronic record shall be considered never to have been submitted by the originator until
such receipt has been obtained. Thus, it can be concluded that India has followed a complex
theory of reception with the complexities of receipt recognition.

5.8.3 Applicability of intermediary regulations under the IT Act

The Amendment also draws reference to the intermediary regulations under the IT Act
applicable to a market place model of e-commerce. Such entities merely act as a
facilitator/market place and do not play any part in creation or modification of the content or
information. The e-commerce entity does not directly control the third party data but only
provides access to a communication system over which information made available by third
parties is transmitted.

99
“See also CM Abhilash, E-Commerce law in developing countries: an Indian perspective, Information &
Communication Technology Law, 269, 274 (2002) ”
100
“BhagwandasGoverdhandasKedia v GirdharilalParshottamdas and Co., AIR 1966 SC 543”
101
“Information Technology Act §12 (2000) ”

76
The e-commerce entity has to observe due diligence while discharging its duty as an
intermediary under the IT Act. This means that the e-commerce entity has to publish the rules
and regulations, privacy policy and user agreement for access or usage of the intermediary’s
computer resource by any person. Such rules and regulations have to list the categories of
information, which if posted online could be considered as illegal such as information that
infringes any patent, trademark, copyright or other proprietary rights, is blasphemous,
obscene, pornographic, paedophilic, libellous, invasive of another’s privacy, hateful, or racial
etc.

Recently the declarations required under the web portal, the correctness of the declaration,
applicability of intermediary regulations under the IT Act, responsibility of the marketplace
e-commerce entities to comply with these have come under the scanner and various views
have been put forth by different experts regarding the same.

However, there have been numerous judgments by various courts in India which have clearly
held that the responsibility of the correctness of the declarations made on e-commerce
marketplace model lie with the manufacturer/seller/dealer/importer as applicable and not on
the e-commerce entity itself.

Amazon Case:

The Division Bench of the Delhi High Court in Amazon Seller Services Pvt. Ltd. v. Amway
India Enterprises Pvt. Ltd.102 has interpreted the requirements of marketplace e-commerce
entities like Amazon as follows-

139. The exemption under Section 79 (1) of the IT Act from liability applies when the
intermediaries fulfil the criteria laid down in either Section 79 (2) (a) or Section 79 (2) (b),
and Section 79 (2) (c) of the IT Act. Where the intermediary merely provides access, it has to
comply with Section 79 (2) (a), whereas in instances where it provides services in addition to
access, it has to comply with Section 79 (2) (b) of the IT Act.

140. In Amazon‘s case, as indeed in Cloudtail‘s and Snapdeal‘s, since they provide services
in addition to access, they have to show compliance with Section 79 (2) (b) of the IT Act. In
other words, they have to show that they (i) do not initiate the transmission (ii) do not select
the receiver of the transmission and (iii) do not select or modify the information contained in

102
“(2020) 267 DLT 228 (DB) ”

77
the transmission. The case of these Defendants is as follows. Where there is a potential
customer who is accessing the site, so long as it is he who clicks the button, it is the customer
who is initiating the transmission. Amazon, Snapdeal or Cloudtail do not ?select‘ the receiver
of the transmission, which is the buyer. They do not modify the information contained in the
transmission, such as the choice of the product, the number of units, and so forth. For
example, if a potential buyer goes to Amazon‘s website and selects a book sold by a seller
whose name is indicated on the site, as long as this entire transaction is not controlled by
Amazon and the choices, of which the transaction consists, are made solely by the customer,
such as, say, the decision to purchase three copies of the book, and these choices are not
altered by Amazon, the requirements of Section 79 (2) (b) of the IT Act would stand fulfilled.

Snapdeal case:

The Karnataka High Court recently quashed a criminal complaint filed against Snapdeal and
its executives Kunal Bahl and Rohit Bansal. The criminal complaint alleged that Snapdeal
and its executives violated the Drugs and Cosmetics Act by allowing the sale of Suhagra 100,
a prescription medicine used for erectile dysfunction.

The court said that an intermediary and its executives cannot be held liable for the actions of
the sellers, who make use of its marketplace to buy or sell items.

Snapdeal in its defence contended that it is an intermediary with safe harbour protections
under Section 79 of the Information Technology Act, and had no role in the transaction.
Under the IT Act, all internet intermediaries get safe harbour, since they merely provide a
platform for communications or sales and purchases without a direct role in what users or
sellers and buyers do on the platform. Snapdeal contended that it was Adept Biocare which
exhibited and offered Suhagra for sale via its platform. Being an intermediary, Snapdeal and
its directors could not be made liable for offences under the Drugs and Cosmetics Act.

Snapdeal argued that it has a system in place to inform all sellers about legal obligations and
therefore it has exercised due diligence under Section 79 of the IT Act and Intermediaries
Guidelines Rules 2011. The seller agreements were accompanied by a schedule of banned
products that categorically included prescription medicines and drugs.

Further, under the IT Act, Snapdeal is only required to remove third party content only upon
actual knowledge in the form of a court order or government notice.

78
The High Court accepting the contentions of the Snapdeal has quashed the criminal
proceedings against Snapdeal and Bahl and Bansal.

It is clear that intermediary e-commerce entities like Amazon or Snapdeal or its executives
cannot be held liable for the actions of the sellers, who make use of its marketplace to buy or
sell items.

Further, under the IT Act, they are required to remove third-party content only upon actual
knowledge in the form of a court order or government notice.

The Consumer Protection law recognises several unfair trade practices such as false and
misleading representation of goods and services in terms of standard, quality, grade etc.,
materially misleading the public as regard the price at which the goods are ordinarily sold,
disparaging of goods, misrepresentations as to warranty or guarantee etc. But, what about
failure on the part of the business in providing adequate disclosure of information regarding
the address of the supplier, characteristics of goods and services, delivery costs, withdrawal
etc. in case of such distance selling? An important challenge in e-commerce is that internet
companies are often difficult to locate. E-mail domains, designation of websites, electronic
addresses or home pages do not necessarily relate to the place of business of the supplier. The
supplier may hide behind the business seat of the provider. Hence, lack of information or low
quality or obscure information provided by the seller/intermediary is a key issue which
remains unanswered in traditional consumer protection law.

One such issue that came up before the consumer court is the case of Rediff. com India Ltd.
v/s Urmil Munjal103, wherein the consumer was dissatisfied with the goods delivered by the
online shopping website. While the consumer wanted to return the product and claim refund,
he did not find a Return Policy, which provided details of the address to which the products
were to be returned. Since the online portal was facilitator between the sellers and buyers as
mentioned in the terms and conditions, it was the duty of the facilitator to inform the
consumer as to how the goods are to be returned to the seller. The Court held the online
portal liable on the grounds of ‘Deficiency in Service’ for not providing sufficient
information.

In the Indian context, e-commerce companies adopting inventory-based model fall within the
meaning of “Intermediary” within the provision of Section 2(1)(w) of Information
103
“2013(3) CLT 79 (NC)”

79
Technology Act, 2008. Section 79 of the Act deals with limitation of liability of these
intermediaries, in so far as they exercise due diligence as provided under Rule (3) of the
Information Technology (Intermediary Guidelines) Rules, 2011. The Rules require the
Intermediaries to publish user agreement, privacy statement for access or usage of
intermediary’s computer resource.

On obtaining knowledge of any information being grossly harmful, harassing, defamatory,

obscene or otherwise unlawful in any manner or violate any law for the time being in force,
the Guidelines requires the intermediary to act within 36 hours to disable such information.
The Rules also require the intermediary to publish on its website the name of the Grievance
Officer and his contact details by which users who suffer as a result of access to the computer
resource can notify their complaints.

Jurisdiction of courts posed a great challenge in the early years when e-commerce cases were
brought before consumer forums. Many cases were struck down due to lack of jurisdiction
which the consumers had to run helter-skelter identifying the right jurisdiction, given the
virtual nature of e-commerce. One such instance was the case of Rajinder Singh Chawla v.
makemytrip.com104 where the Consumer Court rejected a consumer complaint for lack of
jurisdiction. The reason was that the online transaction was spread across various
geographical areas. The Court could not make out a reason for entertaining the complaint.

Online shopping portals continue to provide unfair and unreasonable terms in their User
Agreement, especially with respect to jurisdiction. Such clauses are irrelevant and arbitrary
considering the fact that consumers in online shops are spread over very large geographical
areas.

To remove the arbitrariness in Jurisdiction clause, a recent judgement of the National

Commission in Marwar Engineering College and Research Centre v. Hanwant Singh 105,
has made it clear that Consumer’s place of e-commerce transaction is the jurisdiction to file a
complaint.

The Supreme Court of India in M/s Afcons Infra Ltd. v. M/s Cherian Varkey Construction
Company Ltd. and Other106, while enumerating matters that are suitable for Alternate
Dispute Resolution (ADR), held that all consumer disputes including disputes where a
104
“FA No 355/2013, SCDRC, Chandigarh”
105
“IV (2014) CPJ 582 (NC)”
106
“(2010) 8 SCC 24”

80
trader/supplier/manufacturer/service provider is keen to maintain his business/professional
reputation and credibility or product popularity can be referred to ADR. In view of the above,
the need for mediation in the consumer context in India has been recognised under the
proposed Consumer Protection Bill, 2015. The Bill has introduced mediation in consumer
cases, where disputes can be referred to mediation either at the commencement of proceeding
before the Consumer Forum or at any time during the proceeding.

Furthermore, Ministry of Consumer Affairs, Government of India has established ‘Online

Consumer Mediation Centre’ (OCMC) at National Law School of India University in 2016 to
cater the E-Consumers and E-Commerce companies. This Innovative step is taken by the
Government of India to achieve the objects of the constitution of India. The Ministry of
Consumer Affairs is also following the recent Constitutional Bench (5 judges’) decision of
the Supreme Court of India i.e., Anita Kushwaha v. Pushap Suda107. In this case Supreme
Court held that ‘Access to Justice’ is a fundamental right and laid down four main facets of
the essence of access to justice i.e., (i) The State must provide an effective adjudicatory
mechanism; (ii) The mechanism so provided must be reasonably accessible in terms of
distance; (iii) The process of adjudication must be speedy; and (iv) The litigant’s access to
the adjudicatory process must be affordable.

The mission of the OCMC is to provide innovative technology for E-consumers and E-
commerce companies to manage and resolve conflicts and to propel online mediation as a
first choice to resolving consumer disputes. The Centre runs with a vision to provide for an
innovative online mediation tool that affords consumers better access to justice through quick
and easy redressal mechanism and at the same time provide opportunity for businesses to
maintain good customer relations. The core Values of the Centre include Easy accessibility,
Security, Confidentiality, Cost-effective, Neutrality and Integrity. The online platform is
compatible for the mobile phones also. Consumers have become an integral part of the
growing community of traders in the electronic market. Electronic commerce can be achieved
to its fullest potential in the electronic civilization only when consumers who purchase
through online markets are afforded the same level of protection as conventional consumers.
Misinformation or non-information about business, goods and services and about the
transactions causes a huge detriment to consumer information in the online markets. Website
information still remains poor on a significant proportion of sites and the number of fully
compliant websites in terms of information is also low. Thus, the virtual nature of e-
107
“(2016) 8 SCC 509”

81
commerce has given rise to information asymmetry, which is a great hindrance to consumer
trust and confidence. Effective measures to provide adequate and uniform disclosures in
online shopping is the first step to bringing abrick and mortar system. Accessibility of
business information can be better enhanced by developing quality assurance tools such as
Trustmark that provide quality standards and information checks of the online stores.
Consumer empowerment is an important component of consumer protection. Lack of
awareness about the choice of portals, privacy and dissemination of personal sensitive
information, nature and modes of consumer redressal etc. are some of the significant reasons
why a consumer ends up in a fraudulent trap. Greater emphasis should be laid on timely
education and awareness of the use of the e-commerce platform to appraise consumers about
the consumer rights available to them and the mechanisms through which these rights, if
violated can be redressed.

5.9 Problems with E-Contract

As discussed above the IT Act, 2000 has laid down certain provisions for the validity and the
formation of online contracts but there is still no specific legislation incorporated for the
validity of online contracts in India.108 This leads to a number of issues in transacting and
concluding such contracts.

5.9.1 Jurisdictional Issues

Jurisdiction determines the applicability of the legislation of a particular country whether it’s
about interpretation of law or resolving a dispute. In common parlance when it comes to
traditional contracts the place of execution of contract is the appropriate jurisdiction. In
matter of E-Contracts, the contracting parties are far away from each other and hence there is
no as such place of execution; they are executed in a virtual space. The boundlessness of
Internet creates dilemma as to the determination of jurisdiction. The parties may mutually
agree upon the jurisdiction but that still does not do away with the uncertainty jurisdiction by
default in absence of a “place of execution”. As per Section 13(3)109 of the IT Act 2000:

a) The place of business of the originator will be deemed to be place where the
information was dispatched, and

108
“Ajay Thakur, All you need to know about Online Contracts, iPleaders Intelligent Legal Solutions”
109
“Information Technology Act § 13(3), (2000) ”

82
b) Place of business of the addressee will be deemed to be the place where the
information was received.

In the U.S. in order to determine the jurisdiction the “Purposeful Availment Test” introduced
in the case of Hanson v. N.R. Denckla110 is significant to note that lays stress on the strong
purpose behind the action of a party instead of a mere act of the party i.e., action should be
purposefully directed towards the resident of the state to ascertain the jurisdiction which has a
high burden to prove. In the case of P.R. Transport Agency v. UOI111, it was established that
the place of business is the deciding factor for determination of jurisdiction. It therefore raises
the question of the jurisdiction of the courts, as the case may arise in the e-contract at the
place where the electronic information was sent, irrespective of the fact of the primary place
of business.112 This becomes all the more difficult when parties are situated in different parts
of the world as in matters of virtual space strict jurisdiction cannot be applied.

5.9.2 Minors Entering Into a Contract

One of the requisites for a valid contract is that parties to the contract must have attained the
age of majority which is 18 years according to Indian Standards. In the case of Mohori Bibee
vs. DharmodasGhose113, it was held that an agreement by a minor is void. E-Contracts on the
other hand are contracts conducted by online medium where the parties can be easily duped
or the identity of either of the parties cannot be determined with certainty. This leaves the
party who contracts with such a minor party in a disadvantaged position as he has little
remedy in case the minor commits a breach. The confirmation of age before the contract is
just a self-made commitment and does not guarantee the veracity. In cases of Click Wrap
Agreement or Browse Wrap Agreements, it becomes way more difficult as it enables a minor
to get into such contracts easily. Many times websites, in order to check the age validity
stipulates signing up steps to gain access to age related information. Even after all such
consideration, it still poses problems for checking the authenticity in lack of a proper
legislation in place.

110
“357 U.S. 235 (1958) ”
111
“AIR 2006 All 23, 2006 (1) AWC 504”
112
“Ayushi Singh and Sukhwinder Singh, E-Contract in India: Issues and challenges, 7, (International Journal
of Interdisciplinary Research and Innovation, 2019) ”
113
“(1918) ILR 40 All 325”

83
5.9.3 Standard Form of Contracts

In a standard form of contract there is no scope of negotiation with the terms beings decided
beforehand leaving the other party to either accept the condition or leave it. Many online
contracts belong to the ‘Click-Wrap’ category, a standard contract form in which all
conditions are specified on the software website or installation page and both parties are
allowed to use a click on the required terms and conditions button which leaves no room to
negotiate. As far as India’s situation is concerned, Section 15(3)114 of the Indian Contract Act
states that if a party holds a dominant position and enters into a contract with another party
and the agreement appears unfair on its face or on the evidence given, it must burden an
individual in the dominant position to show that the contract has not been concluded under
pressure. In the case of E-commerce platforms the scope of negotiation is further reduced
which leads to unequal bargaining position leaving users in an unfair position. The
manufacturer, wholesaler, distributor, a carrier and other large entities with giant economic
power are in a favorable position to determine terms and conditions and the other negotiating
party is quietly unable to insist on its terms.48.In the case of L.I.C India v. Consumer
Education and Research Centre115,the Hon’ble court has tried defining such contracts and
observed that where the weaker parties do not have a bargaining power, such type of
contracts were referred as dotted contracts.‘

5.9.4 Sectoral Issues:

5.9.4.1 Issues of E-Commerce in Competition Law:-

The Competition Commission of India (CCI), has time and again recognized this issue of
unequal bargaining power between the e-commerce marketplace platforms and their users
which form the core of several issues faced by the stakeholders.

The year 2019 also witnessed the CCI undertaking investigations against the alleged anti-
competitive practices of technology and internet-based companies. Online travel agencies
such as MakeMyTrip and Oyo are being investigated for allegedly imposing vertical
restrictions and abuse of dominance by denying market access, predatory pricing, etc.
NCLAT has also laid down innumerable times that entities cannot safeguard their own
commercial interests and they are affirmed a special responsibility being the dominant entity.

114
“Indian Contract Act § 15(3), (1872) ”
115
“1995 AIR 181”

84
The growing share of E-Commerce and the boom of digital platforms in India have led to a
host of competition-law related concern. A detailed study has been undertaken by several
other jurisdictions to address the innumerable digital sector concerns shadowing the
economy. In April 2019, the CCI launched a market study into electronic commerce (e-
commerce) titled “Market Study on Ecommerce in India”. The purpose of the study was to
better understand the functioning of e-commerce in India and its implications for markets and
competition. They identified the following issues:-

Platform Neutrality: - This is a major concern among the sellers/ service providers where
the online platforms when acting as a marketplace as well as a competitor on the marketplace
go for policies like “preferred sellers” and “private labeling of products”. In preferred sellers
policy the platforms favor their preferred vendors and influence the market position to their
advantage. In the latter policy the platforms use their own private label and hence enter into
the competitive arena. This leads to turning around the market outcomes by compromising on
the merit aspect.

Unfair Contract Terms for the sellers/providers: - The online platform’s main focus is on
increasing their profit and due to that they often tend to make the business users compromise
on their quality, profit and the equity of the brand. There is no fairness and equity in setting
the terms and conditions by these online platforms and goals which are akin to the business
users. The result is that the business users enter into unilateral engagements or a revision of
commission rates and hence take advantage of their superior bargaining position. Most of the
times, even the discounts offered on various product or services is also done without
consulting the business entity and for the sole reason of increasing crowding on the particular
platform. All this leads to trust deficit of business users on the online platform.

Exclusive agreements:- The major chunk of sellers/service providers in the travelling or

food services enter into exclusive arrangements with a particular platform for advertising and
selling their product. This leads to an unfair trade practice as customers in that case do not
have a large variety of products to make a prudent choice by way of making comparison.

5.10 Constitutional Issues

5.10.1 Legality of Government Tenders and E-Contracts:

85
While the Honorable Prime Minister of India launched the digital India initiative to lift the
scientific temper, at the same time government tenders controlled by electronic means,
violates Article 14 of the Constitution; as tenders regulated by an e-contract deprives that
segment of society from participating in an e-contract which, for some reason, cannot attach
to the electronic means by which an e-contract is concluded. In the case of Maneka Gandhi v
UOI116, J. Bhagwati said that, “Article 14 strikes at arbitrariness in state action and ensures
fairness and equality of treatment. The principle of reasonableness which logically as well as
philosophically is an essential element of equality or non-arbitrariness pervades Article 14
like a brooding omnipresence.” At the same time, it is worth mentioning the judgment of the
Apex court in the case of EP Royappa v State of Tamil Nadu 117 where it was held that,
“equality is a dynamic concept with many aspects and dimensions and it cannot be cabined,
crippled and confined. From a positivistic view, equality is antithesis to arbitrariness. If state
action is arbitrary then it violates Article 14 of the constitution.” It can be said that the
existence of e-contract ‘cripples’ and ‘confines’ the right to equality enshrined under Article
14.

Text of Article 21 says- life ‘or’ personal liberty and the marginal note says life ‘and’
personal liberty. From 1950 to 1978, i.e., from A.K.Gopalan case to Maneka Gandhi case,
judiciary was treating life ‘or’ personal liberty as separate or distinct right but after 1978,
Judiciary has changed ‘or’ into ‘and’. So, now there is no contradiction because judiciary has
synchronized the marginal note and the text of Article 21.From the majority opinion given in
A.K.Gopalan v State of Madras118 which says that, “law means law enacted by state, i.e., law
enacted by competent legislature. There is no need of confirmation with the principle of
natural justice”, to the judgment given in ManekaGandhi v UOI, “law does not mean law
enacted by competent legislature only. But law becomes valid only when it confirms with the
principle of natural justice. Law must not be mere lex, but jus”. Supreme Court has given
massive interpretation to the term ‘law’ mentioned in Article 21. Earlier law was ‘valid law’
but now law should follow principle of natural justice. Therefore we can see the journey from
‘Gopalan case’ to ‘Maneka case’ as a journey from ‘positive law’ to ‘natural law’. Formation
of an e-contract through electronic means and depriving another section of the citizen of the
right to take part in a government tender infringes the right of the individual referred to in
Article 21.
116
“AIR 1978 SC 597”
117
“AIR 1974 SC 555”
118
“AIR 1950 SC 27”

86
In the case of National Textiles Workers Union V. P.R.Ramkrishnan119, the Apex court held
that it is the duty of the court to apply the principles laid down in Part IV. Since, these duties
of the state are socio-economic rights of the citizens; court is changing ‘duty’ to ‘rights’.
Article 14, 19 and 21 are considered as triangle having an interrelationship and declared as
basic structure of the constitution. If one is violating Article 21, then possibility of violation
of reasonableness or arbitrariness is there which results in the violation of Article 14 and 19
also. This triangle has empowered Supreme Court to change non-justiciable principle to
justiciable principle which results in evolving ‘neo-fundamental rights’. This is not ordinary
human rights, but it can be discovered from reservoir of fundamental right, i.e., Article 21.
The court clarified that right to life includes a ‘dignified life’ in the case of OligaTellis v.
Bombay Municipal Corporation and others120 and in Corlie Mullin v. Adminstrator and
Union Territory of Delhi121. If the dignity of any person is affected by state inaction and
flows from non-performance of its obligation mentioned in DPSP, then as per Article 37,
these obligations are unenforceable. Judiciary may enforce those duties by converting the
nature of those duties into rights by means of a catalyst, i.e. Article 21, as previously done in
the case of Mohini Jain V. State of Karnataka122 and Unni Krishnan v State of Andhra
Pradesh123; where the apex court has made the right to education a fundamental right
pursuant to Article 21 which had it presence under Article 45 of Part IV of the constitution.

From the spiritual teachings of Buddha to the political lessons of Gandhi, everyone has
advocated social justice and equality. The founding fathers of our constitution were
concerned about the equality of every citizen of India and not of any specific or majority
community. If that was not the case, then Part III of our Constitution must have used the
word ‘majority’ instead of referring to the interests of every citizen of India, and it is
therefore advisable that the rights referred to in Article 21 and Article 14 of the Constitution
should not be denied to those sections of society which do not have access to the Internet and
are not in a position to enter into an e-contract.

It can be argued that government tenders concluded by e-contract infringe Article 14, read
with 21, because the majority of the population of our country still does not have access to
the internet to participate in e-contracts and, furthermore, the apex court should ensure the

119
“AIR 1983 SC 750”
120
“AIR 1986 SC 180”
121
“AIR 1981 SC 746”
122
“AIR 1992 SC 1858”
123
“AIR 1993 SC 2178”

87
proper participation of all eligible bidders in e-contracts. In order to do so, it is advisable that
the ‘duty’ of the State referred to in Article 38, with the help of Article 21 as a ‘catalyst’,
should ensure equality and thus maintain the dignity of the individual while participating in
an e-contract.

5.10.2 E-Arbitration and E-Contracts

With increasing number of arbitration institutes adopting the mechanism of E-Arbitration in

their practice we can say that the concept is in vogue. The conventional form of conducting
arbitration proceedings is governed by The Arbitration and Conciliation Act’1996 (herein
1996 Act) whereas online mode of arbitration along with being governed by the 1996 Act is
also regulated by IT Act’2000.The E-Arbitration practice incorporates within itself three
dimensions that need to be highlighted. They are; (a) Arbitration Agreement (b) Proceeding
and; (c) Arbitral award. Before submitting any dispute to arbitration, firstly, there must be in
existence E-Contract containing an arbitration clause to be settled via electronic means or an
agreement simply referring online arbitration. The validity of the agreement via electronic
means has time and again been given legal recognition by the courts. Secondly, the
proceeding has to be in consonance with the parties. The same is also reiterated by the Article
5(1)(d)124 of New York Convention that the procedure has to be in accordance with the
parties.

As far as the legitimacy of online evidence is considered, the IT Act ‘2000 lays down that for
the purpose of any evidence the electronic records should not be considered illegal. The
definition of evidence in Section 3(2)125 has also been amended to accommodate electronic
evidence. Thirdly, for the enforcement of arbitral awards Section 31 126 of the 1996 Act also
permits issuing of award via e-mail. For affixing signature not only digital signature but
signature by way of any electronic attachment is given permission provided they are of the
user and duly recognized by him so that there is no scope of fraudulent practices.

The recognition to the concept of E-Arbitration was given by the Apex Court in the case of
Trimax International FZE Ltd. v. V. Vedanta Aluminium Ltd. 127 wherein arbitration was
entered into via exchange of e-mails without formally writing an agreement to that effect. In
this case the offer as well as the acceptance were also entered into via e-mail and contained
124
“Convention on the Recognition and Enforcement of Foreign Arbitral Awards § 5(1)(d), (1958)”
125
“Information Technology Act § 3(2), (2000) ”
126
“The Arbitration And Conciliation Act § 31 (1996) ”
127
“2010 (1) SCALE 574”

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an arbitration clause for settlement of dispute which was duly upheld by the Apex Court. In
the IT Act of 2000, Section 4 128 read with Section 7(3)129 of the 1996 Act also gives legal
validity to the Cyber Arbitration Agreement.

The concept of E-Arbitration has already been recognized by World Intellectual Property
Organization by the establishment of WIPO Arbitration and Mediation Centre. With this the
need of in-person meetings has been done away with and deliberations and discussions by
way of electronic means are encouraged. Under the scrutiny of clear-cut regulations, E-
Arbitration can be conducted in a smooth manner by laying down specific laws for
governing, the jurisdiction, the procedure to be followed within the scope and applicability of
the 1996 Act. Be it Ad-Hoc Arbitration or Institutional Arbitration, the parties concerned
should have consensus-ad-idem with respect to the technology used. It is important to
understand that since there is no real time communication between the parties hence in case
of a virtual space, extra caution has to be maintained in order to ensure the confidentiality in
the best interest of the parties.

E-Arbitration like E-contracts is not devoid of legal issues and there lie uncertainties and
blank spaces from legal point of view. In a cross-border dispute there are jurisdictional issues.
Few other problems that crop up in such a situation would be the law that should govern the
arbitration agreement; whether the award given would have a nature of a domestic or a
foreign award etc. Although parties while entering into an agreement mutually decide on
these aspects or put it as a clause in their agreement but we cannot overlook the lacunas in
law that does not provide for a clear cut provision for arrangements made via electronic
means. E-Arbitration is still a gray area in the Indian Legal System as there are yet many
unsolved pieces to the arrangement.

5.11 Challenges of E contracting in cyberspace

Researcher observed some issues indicate it will be challenges in forming e contracting in

cyberspace like Discoveries, Inventions and spread of new Information Technologies brought
about by computers, internet and cyberspace widen the scientific horizon but pose new
challenges and created problems for the legal world in all aspects of law. The challenges that
we facing today are not just confined to any single traditional legal system but in almost all
major categories of law such as contract law, criminal law, Law of torts etc.
128
“Information Technology Act § 4 (2000) ”
129
“The Arbitration And Conciliation Act § 7(3), (1996) ”

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In India, The information Technology Act, 2000 (ITA) and amendment in several existing
laws through ITA does enforce and control a level of cyber related problems. However, it has
shown inadequacy of law while dealing with information technology itself. The ITA in many
ways falls short of International standards. Therefore, in the era of information technology
such loopholes in legal framework cannot be ignored and can lead to some impairment for
individual as well as nation. New provisions added through Information Technology
(Amendment) Act, 2008 could be a way out from all these challenges but several changes are
still needed for the act to ensure both functional equivalence and technological neutrality.
Hence, there is an urgent need to redefine the cyber laws in India as per International
standards. There are few major areas in cyberspace in which many challenges have been
cropped up on legal front. These areas are inherent challenges, Legal Challenges,
technological challenges, Political and social challenges, practical challenges etc.

5.11.1 Inherent Challenges:

In many countries the laws related to cyberspace have already been developed. U.S. and the
West drafted their own legislations by either adapting their existing laws in the context of
cyberspace or creating new laws in respect thereof. Determining jurisdiction and formation of
e-contracts are two key issues on which traditional legal principles have been largely applied
by Courts India enacted its first law on IT through the IT Act, 2000 based on the principles
Elicit dated in the UNCITRAL Model law of e-commerce. It extends to whole of India and
also applies to any offence or contravention there under committed outside India by any
person.

5.11.2 Legal Challenges:

Jurisdiction

Jurisdiction is the authority of a court to hear a case and resolve a dispute. The issue of
Jurisdiction is highly conflicting and debatable in cyber law as to the maintainability of any
suit which has been filed. It becomes more complicated largely on account of the fact that the
internet is borderless. The notion of jurisdiction is rooted in territoriality from the point of
view of both the court which can properly assert jurisdiction and from the point of view of
the law that should be applied while deciding the dispute. In domestic transactions, a court
will always have the jurisdiction to enforce their respective laws within their physical,
geographical and political boundaries but the enforcement issues throws up several

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challenges when it comes to international transactions due to constant change in technology
in borderless cyberspace. There have been various principles and test that lay down by the
court in U.S. and U.K. which elaborated the scope of jurisdiction and the same is being
followed by the Indian Court. However, the act still does not deal with some major legal
issues such as Jurisdiction, protection of domain name, infringement of copyright law etc.
This led the formation of various challenges before Indian Legal system.

Examples-

Therefore, a practical approaches required to minimized the difficulties and for resolving all
cyber disputes, happening in our cyberspace. Researcher has find out social media & Indian
cyber law approach that, In India, there has been a lot of controversy over the last few months
over Section 66A of the Indian Cyber law being the amended Indian Information Technology
Act, 2000 on different occasions.

In Professor Amices Mahapatra case, Professor Amices Mahapatra was arrested on account
of forwarding of caricature/cartoons on Face book. Further, Ravi Srinivasan Twitter case
showed how on a complaint, a person’s tweets could be brought within the ambit of Section
66A of the amended Indian Information Technology Act, 2000.

In K V Rao case, two men K.V. Rao and Mayank from Mumbai were arrested for allegedly
posting offensive comments against some leaders on their Face book group. The advent of
the internet, transmission of information and transacting of business across borders, various
issues related to cyberspace have cropped up on legal front. Some of the major issues are
determination of jurisdiction, cyber crime, intellectual property, cyber forensic, E-commerce,
Electronic Evidence, privacy and contract. One of the greatest lacunas for resolving these
issues are the absence of comprehensive law anywhere in the world. The problem is further
aggravated due to disproportional growth ratio of Internet and cyber law. Though a beginning
has been made by the enactment of I.T. Act and Amendment made to Indian Penal Code,
Indian Evidence Act etc, problems associated with regulation of cyber crime continues to
persist-contracts are well suited to facilitate the re-engineering of business processes
occurring at many firms involving a composite of technologies, processes, and business

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strategies that aids the instant exchange of information. The e-contracts have their own merits
and demerits. On the one hand they reduce costs; saves time, fasten customer response and
improve service quality by reducing paper work, thus increasing automation. With this, E-
commerce is expected to improve the productivity and competitiveness of participating
businesses by providing unprecedented access to an on-line global market place with millions
of customers and thousands of products and services. On the other hand, since in electronic
contract, the proposal focuses not on humans who make decisions on specific transactions,
but on how risk should be structured in an automated environment. Therefore the object is to
create default rules for attributing a message to a party so as to avoid any fraud and
discrepancy in the contract.

5.11.3 Statutory effect

The Indian Contract Act, 1872 gives a statutory effect to the basic common law contractual
rule that a valid contract may be formed if it is made by free consent of the parties, competent
to contract, for a lawful consideration and for a lawful object and which is not void ab initio.
In general contract, we see that the acceptor can revoke acceptance of the offer before it
comes to the knowledge of the offeror, but what would be the case where an acceptance is
sent via an electronic record, it may not be possible for the acceptor to revoke it before it
comes to the knowledge of the offeror. However, there may be one possibility where
revocation may still take place i.e. when the acceptance is sent by an electronic record and the
same is sent to a computer resource which is not the designated computer resource of the
offeror, but it is not clear what would prevail when both the acceptance-revocation are
retrieved by the offeror at the same time. Indian courts following the traditions of common
law have developed the doctrine of “last-shot rule” 130. This cardinal rule states that an
acceptance should be unqualified and absolute and any acceptance even with little variation is
no acceptance at all. The Contract Act does not prescribe or favor any particular way of
communicating offer and acceptance. It may be done by word of mouth, writing or even by
conduct.131 Thus; there is no requisite of writing for the validity of contracts except for cases
which are specifically required by law to be in writing. Therefore, it would appear that the IT
Act avoids incorporating any specific provision giving validity to online contracts

5.12 Conclusion

130
“Computer Internet & new technology Laws-Karnika Seth,Justice Altam Kabir-edn-2013”
131
“Commentary on IT Act-Apar Gupta-2nd edn 2011”

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Today with the recent advancement in the areas of computer technology, telecommunications
technology, software and information technology have resulted in changing the standard of
living of people in an unimaginable way. The communication is no more restricted due to the
constraints of geography and time. Information is transmitted and received widely and more
rapidly than ever before. And this is where the electronic commerce offers the flexibility to
business environment in terms of place, time, space, distance, and payment. With the growth
of e-commerce, there is a rapid advancement in the use of e-contracts. With this, E-commerce
is expected to improve the productivity and competitiveness of participating businesses by
providing unprecedented access to an on-line global market place with millions of customers
and thousands of products and services.

CHAPTER 6

CONCLUSION AND SUGGESTIONS

After 2019 Act has brought in several commendable changes in the existing framework so as
to protect the interests of the consumers of e-Commerce transactions, it has not brought in
any change to the traditional redressal system except for the introduction of the Alternate
Dispute Resolution channel. There is a need for a self-regulatory mechanism and to put in
place a system to effectively monitor the implementation of the consumer laws in the e-
Commerce transactions. The present system waits for a violation of the law and the consumer
to approach the judicial system for redressal. In the field of e-Commerce transactions the
legal system needs to be more proactive. This is further more relevant in the light of the fact
that these e-Commerce businesses have their own set of Policies and contractual framework
that can be easily monitored and regulated. A person who is making a purchase through an e-
Commerce platform will not be always thinking of her underlying rights and the
consequences at the time of transactions. The e-Commerce businesses that are well aware of
this Consumer psychology may continue with their grossly unilateral contracts/terms of use
governing the transactions through their platforms and will be bypassing the framework
created under the statute.

Under the 2019 Act the Central Consumer Protection Authority (CCPA) is empowered to suo
moto investigate into the violations of consumer rights or unfair trade practices. They have
also been empowered to review the factors inhibiting enjoyment of, consumer rights and
recommend appropriate remedial measures for their effective implementation. Based on these

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empowering provisions appropriate Regulations may be framed to empower the CCPA for
monitoring the compliance of the consumer laws by the e-Commerce businesses. It may also
be explored as to possibilities for conducting of a periodical audit of these websites by CCPA
or such authorities delegated to do so by the CCPA in lines of the present EU framework.
SEBI Complaints Redress System (SCORES) platform is a model that can also be adopted by
CCPA to address the complaints of any violations of the consumer rights by the e-Commerce
businesses by way of misleading advertisement, endorsements or unfair contracts. The need
for such a regulatory mechanism is much relevant in the light of the increasing e-Commerce
market size. The fact that the monetary value of the individual e-Commerce transactions are
comparatively lower and the consumers may not find it compelling to approach the courts for
a remedy considering the underlying cost for the litigations also calls for such proactiveness .

In the world of digitalization, electronic commerce has achieved an extraordinary growth by

allowing the access to Internet trade. Through its reach all over the world it has several
benefits for both the consumers and business, as it is an efficient way of entering into
transactions. It has provided active and joint plan of action to both, the consumers and the
retailers. The growth of the electronic commerce can be measured from the rise of people
using the electronic means as a policy to trade. E-commerce has become the key prospect in
the modern era of advanced technology. It is a means of providing consumers or buyers with
large variety of choices as compared to the traditional way of commerce because buyers can
come across through different number of products from anywhere in the world by accessing
online site. Moreover, it has enhanced the speed and accuracy with which businesses can
interchange information.

E-consumers have the similar desires and necessities like the traditional consumers. In most
of the jurisdictions the laws related to consumer protections are seems to be feeble. Primarily
consumer assurance involves around that the consumer gets the products that he expects and
if the product is found defective, then the remedy is available to him. Building the trust is
even greater in e-commerce than the offline trade. Challenges that hurt consumer trust and
confidence can be traced in consumer protection laws in India. Consumers are known as the
king of the market thus there is need to develop laws and policies to ensure safety of
consumer transactions in e-commerce. The Consumer Protection Act, 1986 recognizes laws
dealing with unfair trade practices but it has failed to mention consumers who buy products
online. To further enhance the consumer welfare in the world of digitalization new act i.e.

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Consumer Protection Act, 2019 came into force. This short note has scrutinized the recent
trends in consumer law in electronic commerce and the challenges faced in protecting the
electronic consumers in India.

In India e-commerce has become a flourishing business not because of the access to the
Internet but also due to expansion of business units beyond their geographical location by
making transaction to any part of the world. As the India’s e-commerce is growing, there are
number of issues arising for the protection of the consumers through this platform. It is
evident that the Internet has provided consumers with powerful tools to search for goods and
services through online mode. Electronic commerce is more than a technology and has
become an integral part of doing business and trade at global level. Despite of immense
growth of e-commerce, e- consumers are looking ahead for pertinent consumer protection
rules and regulations for the recognition of their rights on electronic transactions. We can
consider that promotion of e-commerce is indirectly a platform for promoting the consumers
activities, which focus mainly on the goods and services to be delivered but the legal
authority for online transactions is somehow lacking to protect the consumers.

Privacy is one of the main concerns when it comes to the protection of consumers at the time
of online shopping. The process of e-commerce is impossible to complete unless the personal
details and identity of user is mentioned. Thus, it is very important for e-commerce to
consider or to maintain the privacy of the consumers. The mechanism for authentication and
identification needs to be followed to deal with the concept of violation of privacy of a
person. E-commerce can reach to its highest potential in the world of technology only when
the consumers are given the same level of protection as traditional users or consumers.
Online frauds and scams through misleading the information or non-availability of
information have caused a deep impact on the consumer’s interest and confidence in the
online markets. Consumer assurance is a vital part of consumer safety, thus lack of awareness
regarding the online portals, privacy is considered to be the important reasons for the
entrance of consumers in the trap of fraudulent transactions.

The Consumer Protection Act, 1986 in India regulates the laws related to the consumers and
unfair trade practices of service and good providers. There is no mention of single provision
that deals with the consumer protection law that is for the regulation of online transactions.
Under this act the liability arises whenever there is a “deficiency of services” or “defects of
goods” or due to occurrence of “Unfair trade practices”. The act of 1986 completely excludes

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from it the provision the protection of e-consumers. If any fraud happens to a consumer in an
online shopping than the Consumer Protection Act will not apply. Jurisdiction Courts are
facing countless encounters in the recent years when e-commerce case was filed before the
forum of consumers. Due to lack of jurisdiction, most of the cases are struck down and no
reliefs are given to the consumers. There are various Judgments delivered by the Judges to
remove the arbitrariness in the matter of jurisdiction. Concerning the protection of e-
consumers in e-commerce, the Act of Consumer Protection, 2019 has introduced major
provisions, which will deal with the concept of correct information and issues of jurisdiction
in e-commerce. To resolve the consumer disputes in e-commerce transactions, there is a need
to set up an appropriate mechanism under the consumer protection laws. The legal system has
to try constantly to consider the enhancement of various laws under Consumer Protection Act
to deal with the emerging issues from the use of Internet by the consumers.

Suggestions

In today’s time buying and selling things have become very easy due to the introduction of e-
commerce. People are just one click away from their desired product or service. The
digitalization has ushered and immensely grown in a fresh new era of e-commerce and
brought advanced customer expectations. The digital age has brought easy access, variety of
choices and time saving modes of shopping for the customers. Due to surge of digitalization,
the new act Consumer Protection Act, 2019 came into place, replacing decades old Consumer
Protection Act, 1986 that came into force on 20th July 2020. New consumer protection laws
were required for the drastic change in market functions, as the international trade and e-
commerce activities were increasing rapidly. There are various rights have been given to a
potential consumer like Right to safety, Right to be informed, Right to choose, Right to be
heard, Right to redress, Right to consumer education through which a consumers would free
protected and could willingly make a satisfactory choice among the available products. Due
to rapid boost in the popularity of e-commerce, the proposed amendment attempts to include
e-commerce transactions under the scope of the Act. Under the current Consumer Protection
Act, a consumer can initiate legal proceeding against a seller only where the transaction has
taken place. The new Bill contains an enabling provision for consumers to file complaints
electronically, and in consumer courts that have jurisdiction over the place of residence of the
complainant.

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Despite the fact that several changes has been done in consumer protection act but various
challenges still pose to be a threat to the probable consumer confidence and trust in e-
commerce transaction. As there is absence of particular redress forum for e-commerce
transactions, consumers still afraid to enter into any kind of agreement with e-commerce
entities. The websites do not provide the address or any identity number on which a consumer
could rely on and buy the product. There is absence of proper break-up value of product also
by which a consumer could know where he is spending and how much he is investing in a
product and on what things his money is going, and when it comes to oversees e-consumer’s
are not interested in spending their money with foreign e-commerce entities as it is a time
consuming and expensive procedure therefore filing a complaint against an e-commerce
entity based oversees can be challenging as the question of jurisdiction gets complicated.
Business entities are constantly innovating, adapting new technologies and evolving
challenges in the area of e-commerce.

There are various challenges that can be seen in e-commerce by the e-consumer’s are as
follows:

1. Unfair trade practice and misleading advertisements.

2. Language barriers.

3. E-commerce offers made by anonymous traders.

4. Uncertainty of merchantability goods.

5. Un-understandable refund policies.

6. Lack of clear and sufficient information regarding the seller.

7. Absence of identity of e-commerce entities.

8. Non-fulfilment of returns or refund policies.

9. Long and tedious procedure of refund procedure.

10. Data security and online scam.

11. Identity theft and frauds.

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12. Late or no delivery of goods or defective products without any exchange or refund
policy.

13. Lack of consumer awareness of their rights and duties.

14. Absence of Cash on delivery system.

15. Fraudulent entities that take money without providing goods or service.

16. No- existence of customer care.

17. Protection of personal data or privacy.

18. Non- compliance with the legal provisions.

Because of these issues and challenges an e-consumer afraid from investing in goods or
service available with e-commerce entities.

There should be a transparent method in respect of payments which is to be adopted by e-

commerce entities, there should be proper compliance with the rules and regulations given by
the government in various statues, presence of proper break-up value of the products for e-
consumer, absence of unfair trade practices and misleading advertisements or offers made by
the e-commerce entities which could influence the purchase decision of a probable consumer.

The enforcement of Consumer Protection Act, 2019 can be seen as a sincere act of the
government which has enhanced the rights of consumer, elevated the punishments and
speedy disposal of pending cases. It has innovated in certain ways and even mentions about
the e-commerce entities, which was an unaware term during 1986. In this digitalized world, it
was necessary to amend the existing laws as the way of selling and buying goods and services
have also shifted from offline to online. But there should also be mention about e-consumer’s
and their redress forum, which could boost the potential consumer to buy things online and
feel protected through it. Consumer awareness and knowledge about the e-commerce
platform should be enhanced by the way of media and newspaper publications. And lastly the
e-commerce entity engaged in selling the goods and services should provide for proper
internal working structure that would guarantee the consumer protection and enforcement of
consumer rights. Therefore, it can be concluded that, socio- economic development can be

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traced every month so we can expect more amendments to the act hence the proper
compliance of Consumer Protection Act, 2019 can be seen with the upcoming time.

When we step into the third decade of the 21st century, e-commerce will multiply its scale
and will become a multibillion economy; being regulated and managed by e-contracts.
Moreover, India is on the verge of a major transformation, and there is a need to capitalize on
its demographic dividend, which can push it to become the next China-USA story, or even
better. This can be done better by improving technological connectivity across the length and
breadth of the nation and making the newer generation acquainted with the Internet; which
will eventually increase the need for an e-contract that saves a lot of time and is also more
economical and eco-friendly as compared to the traditional contract.

Although the e-contracts are adequately covered by the Indian legal system, the challenge
before lawmakers is to keep abreast of the problems that will emerge with emerging
technology and resolve them appropriately. It is the call of the hour that some major reforms
are incorporated in the various laws affecting E-Contracts. A Uniform Commercial Code like
the one prevalent in U.S. can also eradicate the various loopholes in online contracts.

The creation of an e-contract is due to the drastic shift in the evolving global technological
environment; at the same time it can also be argued that the e-contracting laws are still vague
in nature and need to be refined to encapsulate all the changes taking place in the complex
world of e-commerce and e-contract for greater versatility leading to change of perspective
with some simple outlook. So; the next time you press uninterestingly on “I accept” button
without seeing the terms and conditions or hastily tearing the software cover without reading
the terms typed on it; “Think Twice”!

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 BIBLIOGRAPHY

Statues
 E Commerce Act 1998
 Information Technology Bill 1999
 IT (Amendment) Act 2008
 Indian Penal Code 1860
 Reserve Bank of India Act 1934
 Information Technology (Reasonable security practices and procedures and sensitive
personal data or information) Rules 2011
 Indecent Representation of Women (Prohibition) Act 1986
 Information Technology (Intermediaries Guidelines) Rules 2011
 Payment and Settlement Systems Act 2007
 Income Tax Act 1961
 Service Tax Rules 1994
 Finance Act 1994
 Central Sales Tax Act 1956
 Information Technology (Intermediaries Guidelines) Rules 2011
 Consumer Protection Act 1986

Books
 Alghamdi, Abdulhadi M. The Law of E-Commerce: E-Contracts, E-Business. Author
House, 2011.
 Barnhill, John. “Interstate Commerce Act.” Encyclopedia of White-Collar &
Corporate Crime.
 Kamath, Nandan. Guide to Information Technology Act, Rules and Regulations.
2001.

Journals/Articles
 Mahipal, D., (2018).E-commerce Growth in India: A study of Segments Contribution.
Academy of Marketing Studies Journal. 2(2).

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  Kumar, N., (2018). E-Commerce in India: An Analysis of Present Status, Challenges
and Opportunities. International Journal of Management Studies. (5), 2(3), 90-95.
 Khosla, M., Kumar, H., (2017). Growth of e-commerce in India: An analytical review
of literature. IOSR journal of Business and Management. 19(6), 91-95.
 Seth, A., Wadhawan, N., (2016). Technology Revolutionizing Retail Practices in
Digital Era. International Journal of Recent Research Aspects, 60-62.
 Shettar, M., (2016). Emerging Trends of E-Commerce in India: An Empirical Study.
International Journal of Business and Management Invention. 5 (9), 25-31.
 Shahjee, R., (2016). The Impact of Electronic Commerce On Business Organization.
Scholarly Research Journal for Interdisciplinary Studies.4 (27), 3130-3140.

Websites :
 http://www.legalserviceindia.com/
 http;//www.mondaq.com/india/
 http://www.lawctopus.com/

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