Cyber Trends By Perry4Law And PTLB

Perry4Law and Perry4Law’s Techno Legal Base (PTLB) have been providing trends in the fields of information and communication technology (ICT) for long. These include trends pertaining to cyber law, cyber security, cyber forensics, etc.

Perry4Law and PTLB have discussed the Cyber Law Trends and Developments of India 2013 (PDF), Cyber Security Trends and Developments in India 2013 (PDF) and Cyber Forensics Trends and Developments in India 2013 (PDF) so far. There may be other trends in pipeline as well.

For detailed analysis, the readers may see the cyber law, cyber security and cyber forensics trends. 

Bitcoins Websites In India Under Regulatory Scanner

Recently the Reserve Bank of India (RBI) cautioned users of virtual currencies against various risks. These include legal risks as well. RBI has not said anything new and it has just reiterated what many legal experts have been saying for long.

Further, although many Bitcoins websites in India have been either suspended or closed down yet the civil and criminal liabilities have already accrued. This means that all these Bitcoins websites owners can be prosecuted for violation of Indian laws even if the websites have been shut down.

In fact the enforcement directorate has already conducted searches against Seven Digital Cash LLP and its Bitcoin website – www.buysellbitco.in. This means Seven Digital Cash LLP is now facing legal risks for dealing in Bitcoins in India. Not only Seven Digital Cash LLP but all other Bitcoins websites are equally under a very probable legal risk to get their accounts and business scrutinised by law enforcement agencies of India.

This situation has arisen because of the legal mistakes committed b y these websites. These Bitcoin websites must have followed the cyber law due diligence requirements and Internet intermediary guidelines. However, they have failed to do so and now they are facing a situation where serious criminal charged can be leveled against them.

Seven Digital Cash LLP Facing Legal Risks For Dealing In Bitcoins In India

E-commerce websites in India are required to comply with many laws in India. However, most of the e-commerce websites are simply opened with great disregard to the Indian laws. As a result sooner or later they find themselves on the wrong side of the law. E-commerce websites frauds, crimes and offences have significantly increased in India and there is an urgent need to regulate them.

One such area that is grossly unregulated pertains to dealings in Bitcoins in India. Although it being too risky to deal in Bitcoins in India without complying with Indian laws yet many people and websites kept on dealing in the same. But the Reserve Bank of India (RBI) and Indian government were slow in reacting to the issue. Meanwhile, Bitcoins frauds and crimes were increasing world over, including in India.

Realising the gravity of the situation, the RBI cautioned users of virtual currencies against various risks. These include legal risks as well. With the present advisory, the websites and individuals dealing in Bitcoins in any manner whatsoever must comply with the techno legal requirements of Indian laws. Otherwise, they may find themselves in big trouble.

Many people and companies were dealing in Bitcoins in India with great disregard to the cyber law due diligence requirements and in active violation of the Internet intermediary liability rules framed under the Information Technology Act, 2000. The money laundering and foreign exchange laws of India were also not analysed before opening such Bitcoins websites.

In the first possible prosecution of individuals/company engaged in dealing in Bitcoins, searches were conducted on Seven Digital Cash LLP which owns a Bitcoin website – www.buysellbitco.in based in Ahmedabad. “We have conducted searches at 2-3 locations of Seven Digital Cash LLP and its website. The company was involved in buying and selling of Bitcoins in India, operating from Ahmedabad,” an ED official confirmed. The website www.buysellbitco.in has stopped operating online soon after the searches.

Although the website has stopped operating after the search, this would not absolve the people behind he website from civil and criminal liabilities for violation of any Indian law. This incidence is also an eye opener for other Bitcoins websites operating in India to fall in line with Indian laws. Otherwise, they may be prosecuted in the near future.

Bitcoin Users In India Vulnerable To Legal Actions: RBI

Reserve Bank of India (RBI) has reiterated what was explicit and was expected. Through a public advisory RBI declared that use of Bitcoins in India is legally risky. The advisory of RBI is in conformity with the views expressed by Perry4Law so far.

By taking this stand RBI has also clarified that use of Bitcoins in India must be in compliance with Indian laws. Otherwise, civil and criminal prosecutions can be initiated against the users of Bitcoins in India.

The legality of Bitcoins in India was never guaranteed. However, in order to jump upon the wagon band of Bitcoins, many Bitcoins entrepreneurs and stakeholders are openly violating the laws of India, especially the cyber law of India.

Techno legal experts have been maintaining that it is legally wrong to assume that dealings in Bitcoins in India if strictly legal as individuals and companies have to take care of the cyber law due diligence and Internet intermediary rules compliances. For instance, a platform selling and purchasing or trading in Bitcoins must not only comply with the provisions of Information Technology Act, 2000 but also with laws applicable to online trading and income tax.

With the present advisory, the websites and individuals dealing in Bitcoins in any manner whatsoever must comply with the techno legal requirements of Indian laws. Otherwise, they may find themselves in big trouble.

Cyber Frauds Due Diligence In Indian Companies Is Missing

The corporate environment is changing in India at a rapid rate. The Indian Companies Act, 2013 (PDF) has played a major role in the corporate environment of India. The Act has put a special emphasis on frauds investigation and sound corporate governance. The Serious Frauds Investigation Office (SFIO) has been entrusted with a greater responsibility to avoid commission of serious frauds by companies in India.

IT and cyber frauds in Indian companies are increasing. By their very nature these high profile crimes affect corporate sector. Indian companies are also facing increased corporate frauds, financial frauds, white color crimes and technological frauds. In order to prevent black money from being accumulated offshore, the Indian government has proposed establishment of Income Tax Overseas Units (ITOUs) of India in foreign countries.

As far as international aspects of cyber crimes are concerned, India has entered into mutual legal assistance treaties (MLAT) with many countries around the world. An Indo-American alert, watch and warn network for real time information sharing in cyber crime cases has also been established.

As per the Information Technology Act, 2000 and the Information Technology (Intermediary Guidelines) Rules, 2011, an Indian company providing technology and online services in India is an intermediary and it is required to follow cyber law due diligence to escape Internet intermediary liability in India. So if cyber crimes are committed using its network or infrastructure then such company is required to observe cyber law due diligence to escape Internet intermediary liability.

According to Perry4Law, the leading techno legal law firm of Asia, corporate frauds, financial frauds and cyber crimes are still on rise in India. Companies in India are not at all following cyber law due diligence requirements and this has resulted in increased cyber crimes and online frauds in India. These irregularities and crimes can be easily detected if an e-discovery exercise is undertaken by law enforcement agencies of India.

However, Indian companies, especially the telecom companies, are openly violating the laws of India. For instance, Tata Teleservices Limited (TTL) and Airtel are violating Indian cyber law that also to the full knowledge of department of telecommunication. Such violations must be stringently taken by Indian government and its departments.

In their own interest, Indian companies must observe cyber law due diligence so that cyber crimes and frauds can not only be prevented but they can also be successfully prosecuted.

Airtel And Tata Teleservices In Cyber Law Violation Controversy

Indian telecom companies like Airtel and Tata are flouting cyber law of India and that too within the knowledge of the Department of Telecommunication (DoT). It has been reported that both Tata and Airtel have violated the provisions of Information Technology Act, 2000 and the Internet intermediary rules.

The disclosure was initially made at the Cyber Crime Investigation Centre of India managed by Perry4Law’s Techno Legal Base (PTLB). According to Praveen Dalal, managing partner of New Delhi based law firm Perry4Law and leading techno legal expert of Asia, both Tata Teleservices Limited (TTL) and Airtel have failed to comply with Cyber Law Due Diligence Requirements as prescribed by the Information Technology Act, 2000.

TTL and Airtel have also violated the provisions of Information Technology (Intermediaries Guidelines) Rules, 2011 of India under Information Technology Act 2000 (PDF), informs Dalal.

This makes both the telecom companies TTL and Airtel as well as the officers in default to be prosecuted under the provisions of IT Act, 2000. Section 85(1) of the IT Act 2000 provides that where a person committing a contravention of any of the provisions of the IT Act 2000 or of any rule, direction or order made thereunder is a company, every person who, at the time the contravention was committed, was in charge of and was responsible to, the company for the conduct of business of the company as well as the company, shall be guilty of the contravention and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub- section shall render any such person liable to punishment if he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention. However, since both Airtel and TTL have duly informed as per Indian laws and they have failed to observe cyber law due diligence, they have no protection under the proviso.

Further, Section 85(2) of the IT Act, 2000 provides that notwithstanding anything contained in sub- section (1), where a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly.

Now since the Department of Information Technology (DIT), Department of Telecommunication (Dot) and Telecom Regulatory Authority of India (TRAI) are well aware of these negative developments on the part of TTL and Airtel, they must take suitable actions against the guilty companies and the officers in default.

Tata Teleservices Limited (TTL) And Airtel Are Violating Indian Cyber Law

Tata Teleservices Limited (TTL) and Airtel are violating IT Act 2000 and complaints have been filed against them at Department of Telecommunication (DoT) and Telecom Regulatory Authority of India (TRAI).  Both Tata Teleservices Limited (TTL) and Airtel have failed to observe cyber law due diligence as required by the Information Technology Act, 2000 and the Information Technology (Intermediaries Guidelines) Rules, 2011 (PDF).

As per the provisions of the Information Technology Act, 2000 both these companies and the defaulting officials are liable to be prosecuted. Even their telecom licences under the regulations of DoT can be suspended/cancelled and fine be imposed by DoT for these violations.

Once the matter has been brought to the notice of DoT and regulatory authorities like TRAI, even they are under an obligation to investigate the issue on their own. They must ascertain how much the telecom companies like TTL and Airtel are following Indian laws and the conditions of their licences.

However, DoT has taken a very soft stand against these big telecom companies so far. As a result these companies are taking Indian laws for granted as they are well aware that DoT would not touch them easily.

In 2007, DoT had found involvement of Vodafone, Airtel and Idea in a case where the three had sold bulk connections to third parties who in turn were selling those SIM to retail subscribers and in the process flouted certain rules. DoT is also learnt to be in process of issuing fresh show cause notice to these companies. DoT must also issue show cause notices to TTL and Airtel for violating the provisions of IT Act 2000 and not complying with the same in true letter and spirit.

Bitcoins And Indian Approach

Bitcoin is a digital currency that is making rounds these days. However, with its growing popularity, Bitcoins frauds and crimes are also increasing world over. Cyber criminals and crackers have started exploiting software and the platforms using Bitcoins. In one such incidence Sheep Marketplace, the descendant of Silk Road, has been compromised and 5,400 Bitcoins (worth about $5.6 million) have been stolen.

Previously E-Sports Entertainment LLC (ESEA) entered into a consent judgment for creating ESEA Botnet to facilitate mining of Bitcoins at the expense of user’s computing resources.

Bitcoins have been banned in Thailand and may be illegal in India as well unless laws are followed by those engaged in using Bitcoins in India. India cannot remain indifferent towards these developments. Many of these negative developments are actually happening in India. Illegal use of Bitcoins is increasing in India and RBI and Indian government are indifferent in this regard. As a result Bitcoins are used in India for multiple purposes including conducting medical and surgical abortions in India.      

Many Bitcoins enthusiastics wonder whether use and dealing in Bitcoins legal or illegal in India?  According to techno legal experts there is no straight forward answer to this question but the legality of Bitcoin in India is in doubts.

Those companies and websites that are accepting Bitcoins in exchange of goods and services are doing it in an illegal manner and they can be prosecuted and punished. It is always better to observe cyber law due diligence before engaging with Bitcoins in India in any manner whatsoever.