Before a person or institution wishes to establish an e-commerce business in India, he/she/it must know the essential legal formalities for starting e-commerce business in India. The legal environment for establishment of e-commerce in India is complex in nature and it should not be taken lightly.
We have been receiving lots of queries regarding successful and legal opening of e-commerce business in India. We have already explained the legal formalities required for starting e-commerce business in India. In this article we would discuss the legal requirements for starting an e-commerce websites in India.
To start with, we would like to say that we have no dedicated e-commerce laws and regulations in India and they are still evolving. The Information Technology Act 2000 (IT Act 2000) governs the online issues of e-commerce in India.
IT Act 2000 is the sole cyber law of India. The cyber law of India mandates that the e-commerce entrepreneurs and owners must ensure cyber law due diligence in India. The cyber law due diligence for companies in India has already become very stringent and many foreign and Indian companies and websites have been prosecuted in India for non exercise of cyber due diligence.
E-commerce entrepreneurs and owners in India must understand that legal issues of e-commerce in India are different for different categories of e-commerce. For instance, electronic trading of medical drugs in India requires more stringent e-commerce and legal compliances as compared to other e-commerce activities. Digital communication channels for drugs and healthcare products in India are scrutinised more aggressively than other e-commerce activities. In fact, regulatory and legislative measures to check online pharmacies trading in banned drugs in India are already in pipeline.
The legal requirements for undertaking e-commerce in India also involve compliance with other laws like contract law, Indian penal code, etc. Further, online shopping in India also involves compliance with the banking and financial norms applicable in India. For instance, take the example of PayPal in this regard. If PayPal has to allow online payments receipt and disbursements for its existing or proposed e-commerce activities, it has to take a license from Reserve Bank of India (RBI) in this regard. Further, cyber due diligence for Paypal and other online payment transferors in India is also required to be observed.
Perry4Law and Perry4Law Techno Legal Base (PTLB) recommend that all e-commerce entrepreneurs and owners must do a proper techno legal due diligence before opening an e-commerce website. The Internet intermediary liability in India may be frequently invoked against e-commerce websites in India. The Information Technology (Intermediary Guidelines) Rules 2011 prescribes stringent liabilities for e-commerce websites in India. Further, e-commerce websites in India must ensure privacy protection, data protection, data security, cyber security, confidentiality maintenance, etc as well.