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The primary objective behind the enactment of the Information Technology Act, 2000 ("IT Act") was to establish a legal framework for electronic commerce. However, it has been utilized as a comprehensive legislation, encompassing a wide range of topics including but not limited to the regulation of data privacy, and the formation of the National Computer Emergency Response Team to address cyber incidents.

However, there has been a significant development regarding the IT Act lately. The Ministry of Electronics and Information Technology has published a notification in the official gazette, which amends Schedule 1 to the IT Act. This amendment marks a change in the way specific instruments and contracts are executed.

Digitisation of Banking Instruments: A Reality

The original version of the IT Act did not cover the documents or transactions mentioned in the First Schedule. The First Schedule specifically excluded all Negotiable Instruments from its scope, with the exception of cheques. This meant that all Negotiable Instruments, apart from cheques, were not subject to the IT Act.

With the latest amendment to the First Schedule of the IT Act, demand promissory notes and bills of exchange have been included alongside cheques, thereby expanding the scope of the IT Act. This means that digital handling of bills of exchange and promissory notes could be introduced in a manner similar to the replacement or supplement of paper cheques with transfer instructions under the Payments and Settlements Systems Act, 2007. However, such digital handling will only be allowed if these instruments are issued by one of the regulatory authorities, namely, the Reserve Bank of India (RBI), National Housing Bank (NHB), Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India (IRDAI), and Pension Fund Regulatory and Development Authority (PFRDA), as specified in Pare 2(i) of S.O.4720 (E).

In September 2000, the Working Group on Discounting of Bills by Banks, as part of the RBI, highlighted in a report that there were situations where goods were delivered before the corresponding documents. This created logistical challenges, which the government aims to resolve by digitizing bills of exchange and promissory notes, making this problem a thing of the past.

As authorized attorneys often handle these transactions, it was important to avoid any unnecessary delays caused by the need to create a paper trail that proves their delegated authority. To address this issue, another amendment was made to the First Schedule of the IT Act, which removed the exclusion of Power of Attorneys from its scope. This means that Power of Attorneys are now subject to the IT Act, but only if the entity delegating the authority is regulated by the IT Act.

Paperless Real Estate Transactions:

A seemingly unimportant single line in Section 2(iii) of the Notification, which reads "serial number 5 and the entries relating thereto shall be omitted," has the potential to revolutionize the process of land sale and conveyance in India if successfully implemented. Serial No. 5 of the First Schedule pertains to "Any contract for the sale or conveyance of immovable property or any interest in such property." By removing this entry, the IT Act would become applicable to such transactions, thereby enabling digital execution of agreements such as Sale Deeds and Lease Deeds. However, further clarity is required on the implementation process to ensure that the digitalization of sale and conveyance deeds becomes a reality soon.

In addition to allowing for the digitalization of transactions, the IT Act also includes provisions for legally recognizing both the electronic record itself and the digital signature that is attached to it.

Conclusion:

It is expected that the amendments will be accompanied by a framework to ensure the reliable and secure honoring of Cheques, Bills of Exchange, and Promissory Notes, thereby strengthening the financial system. It will be important to establish penal provisions in cases of default to avoid any ambiguity in interpreting default. This will ensure the system's dependability and robustness

The aim of bringing real estate transactions within the ambit of the IT Act is to ensure prompt closure of deals, as well as to minimize, if not completely eradicate, the potential for disputes and fraudulent activities. Additionally, with the establishment of a strong framework, transactions that are currently not covered under the IT Act can also be migrated to the digital space, thus enabling all transactions to eventually move online.

References:

https://www.mondaq.com/india/it-and-internet/1246674/recent-amendments-to-the-information-technology-act-2000--a-shot-in-the-arm-for-banking-and-business

https://www.barandbench.com/law-firms/view-point/will-documentation-finally-go-paperless-an-analysis-into-the-recent-amendments-to-the-information-technology-act-2000