As world is moving towards digitalization and AI is growing at fast pace. Every country around the world is promoting digitalization to increase the business and reduce the cost of the corporates so that they can trade freely in the market.
With rapid growth of technology electronic agreements are taking the place of traditional handwritten agreements which people used to enter before. Indian Government to promote digitalization has specifically enacted a law “The Information Technology Act”. Section 10 of The Information Technology Act, 2000 duly recognizes electronic agreement(s) entered between the parties. Section 5 of the Information Technology Act duly recognizes digital signature(s).
An electronic contract is a contract which takes place via e-commerce, usually by putting the signatures digitally on the agreement or through electronic communication entered between the parties.
This writeup will specifically focus on stamping of the digital agreement.Stamp Duty and Its Applicability to Digital Agreements
In India every agreement needs to be stamped to be legally acceptable in the eyes of Law. Indian Stamp Act 1899 governs the stamping of the agreement. Stamp duty is a Government fees paid on the legal documents to make them legally valid and acceptable by Indian courts. The schedule of payment of stamp duty is defined in the Indian Stamp Act and every state comes out with a notification of the stamp duty payable on a particular document in the said state.
Procedure for Stamping of Digital Agreements
Stamping of digital agreements is one of the major issues which the organisations are facing while entering into a digital contract with their customers. The issue pertaining to stamping of the digital agreement can be addressed in two ways.
- a The parties after entering into a digital agreement can send the document to the controller for stamping. As per Section 40 of The Indian Stamp Act the collector on receipt of document has the power to stamp the document/agreement. The collector in exercise of his power can impose a penalty which can be maximum up-to 10 times of the actual stamp duty which is required to be paid in addition to the stamp duty which was payable. Once the stamp duty has been adjudicated by the collector and the duty and penalty so adjudicated paid, the deficiency in that document stands removed and the document stands validated and is admissible in evidence in a court of law.
- b The second way of performing the same is that stamp duty should be purchased in advance and the same be made part of the agreement. A specific clause should be incorporated in the agreement stating that the stamp duty has been paid vide stamp paper bearing number and the same be considered as part of the agreement and further stamp paper number should also be mentioned on each page of the agreement.
Conclusion
Digital stamping of agreements in India is at a crucial juncture where the requirement of conventional law meets digital practices, while recent court judgments have upheld the applicability of electronic contracts to stamp duties thus imposing on firms’ peripheral adjustments. When it comes to multi-state operations and high-volume digital transactions, e-stamping brings an easy process, albeit with some challenges. Changes may also be anticipated in the legal framework and practices used while e-stamping documents based on India’s growing digital economy. To ensure that digital agreements are legal and admissible, businesses need to work out different ways of meeting with local laws and state stamping rules to comply with the laws.
Authored ByVarun S. Ahuja
M/S Ahuja Law Offices
M: 9971673660