E-commerce has attracted great interest of various stakeholders in India. We see lots of innovation and entrepreneurship efforts in the field of e-commerce in India on regular basis. Some of these e-commerce ventures are truly innovative and promising. However, a dominant majority of these e-commerce ventures and websites are flouting the laws of India while conducting their businesses in India.
There is a general misconception that e-commerce in India can be operated without any legal compliances. This is not true as there are various legal requirements that must be complied with in order to run an e-commerce business in a legal manner. According to Perry4Law, a New Delhi based techno legal corporate and ICT law firm, “E-Commerce in India requires compliance with various Statutory Laws of India. The chief among them are the Cyber Law of India, Indian Contract Act, Privacy and Data Protection Regulations, Cyber Security Regulations, Foreign Investments Regulations, etc.”
However, Indian e-commerce websites are not complying with Indian laws and there is an urgent need to suitably regulate Indian e-commerce. Indian government has already started working in this direction and e-commerce business structuring in India may be regulated accordingly. India has also declared that foreign companies and e-commerce portals would be required to register in India and would be required to comply with Indian laws.
There are some areas where e-commerce websites of India are in direct conflict with Indian laws. These include non observation of cyber law due diligence (PDF), e-commerce due diligence and foreign exchange management act (FEMA) compliances. Even Indian government is well aware of these irregularities and illegalities and it waited for long to initiate any action against the guilty e-commerce websites. Now enforcement directorate has started investigation against many e-commerce websites and their owners for possible violation of provisions of FEMA.
According to Praveen Dalal, managing partner of Perry4Law, the legal position is that Foreign Direct Investment (FDI) is not allowed in India for Business to Consumer (B2C) Multi Retail E-Commerce Activities. However, almost all E-Commerce Websites of India have accepted Foreign Funding and utilised them for their E-Commerce Businesses in direct violation of Indian Laws. They have tried to circumvent Indian Laws by showing it as a funding for advertisement and other expenses but this labelling would not change the “True Nature” of the transaction, opines Dalal. Besides, there are other Techno Legal Compliances that these E-Commerce Websites have failed to comply with and these Irregularities and Illegalities would be investigated by Indian Government very soon, informs Dalal.
Now it is for the e-commerce website owners to show that they did not violate any law of India. However, this would be a tall claim as clearly they are on the wrong side of Indian laws.