Digital India

In a progressive move, the Ministry of Electronics and Information Technology (MeitY) has notified[1] a modification to the Information Technology Act, 2000 (“IT Act”), which opens new doors for electronic execution of contracts.

Prior to this modification, instruments/transactions such as negotiable instruments (other than  cheque), power of attorneys (PoAs), trust, will and contract for the sale or conveyance of immovable property or any interest in such property were categorised as documents, which could not be electronically executed or submitted as evidence before a court in electronic form. This prevented a lot of financial products from being completely digital because documents like PoAs, sale deeds, mortgage deeds, etc., could not be executed digitally. Mortgage is a key security element in loans given by banks/financial institutions to corporates and even individuals. However, it was a cumbersome and time-consuming process for parties to schedule a physical execution of mortgage, particularly when the property was situated in remote areas with its registration jurisdiction falling under the local registrar of sub-assurances. Consequently, physical signing of mortgage documents faced a lot of delay and inconveniences, which were exacerbated during the Covid-19 pandemic owing to the lockdowns, travel restrictions. This impacted the lenders’ interests and created difficulties for borrowers in terms of seeking additional timelines or waivers on additional interests accrued on account of breach of timelines.

This notification is like a breath of fresh air for parties in a commercial transaction as it exempts some relevant documents from the ambit of Schedule I of IT Act: (a) negotiable instruments like demand promissory note, bill of exchange issued in favour of or endorsed by entities regulated by regulators like Reserve Bank of India, Securities and Exchange Board of India, Insurance Regulatory and Development Authority, Pension Fund Regulatory and Development Authority, National Housing Bank (“Relevant Entities”); (b) PoAs that empower Relevant Entities to act for, on behalf of and in the name of persons executing them; and (c) contracts relating to sale or conveyance of immovable properties.

This amendment permits products/processes like PoAs, promissory notes, bill of exchange discounting, customer onboarding by portfolio managers, and even a mortgage document (which does not require compulsory registration) to be executed, stored and presented in evidence electronically. Electronically executed documents are admissible in courts as evidence subject to compliance with relevant provisions of Indian Evidence Act, 1872[2]. This will result in saving of time, costs, create a transparent and tamper proof method of completing financing transactions. In this regard, Digital Document Execution (DDE), a platform launched by NeSL[3] already provides facilities for electronic execution of financial contracts and acts as a digital repository of documents for contracting parties. The existing infrastructure and technological capabilities of DDE might help in seamless implementation of this notification.

The legal requirement entails documents relating to sale or mortgage of immovable property for a value above INR 100 to be compulsorily registered[4] with the relevant authority. While mortgage by way of deposit of title deeds which does not require compulsory registration in some states can now be digital in light of this notification, English mortgage and equitable mortgage (which require compulsory registration) is still faced with the challenge of electronic registration once the document is executed. It remains to be seen how the sub-registrars and other institutional authorities will implement the mechanism for electronic registration of documents related to immovable property. This will also require a robust, safe and reliable technological infrastructure development at various registration centres across the country. The registrars and staff handling such technical platforms would also need to undergo adequate training and acquire knowledge to implement the new regime of execution in true spirit. To this extent, various states have already started taking steps to promote e-registration. Maharashtra became the first state to promote e-registration facilities for property documents, which was earlier available only for leave and licence agreements[5]. Further, an online database of registered sale, mortgage documents relating to immovable property across the country will also facilitate efficient title tracing, associated diligences, credit appraisal and simplify the release of security.

Another critical aspect of financing or commercial transactions which will necessitate amendment to existing legislation to facilitate implementation of this notification is in respect of PoA. A PoA, which is commonly executed with a deed of hypothecation in financing transactions, is required to be customarily notarised by a registered notary to avail the presumption of genuineness under the Indian Evidence Act, 1872. Currently, the provisions of Notaries Act, 1952 do not recognise ‘electronic execution’ or ‘electronic signatures’. Therefore, it will be a step forward to amend existing legislation to account for electronic execution of a PoA pursuant to this notification.

It is only a matter of time that parties, sub-registrars and other stakeholders start adapting to this new practice. The RBI is also encouraging regulated entities (“REs”) to eliminate the use of paper in their operations [6] and transition towards green data centres. Electronic execution of contracts can help REs in their efforts towards climate finance by minimising usage of paper. To further simplify financing transactions, it might be relevant for central and state governments to consider looking at legislative reforms for uniform stamp duty structure across different states and facilitate digital payment of stamp duty on contracts of all nature.

In addition to the many benefits of electronic execution as set out above, it will also result in the ease of doing business for the industry. The IMF chief, Kristalina Georgieva, recently called India ‘a bright spot on an otherwise dark horizon’ on account of it being a fast-growing economy and such growth being underpinned on structural reforms in the country. With India’s upcoming presidency at the G20 summit, this notification is only a small step in the right direction for a truly digital India. This amendment to the IT Act, coupled with various other policy initiatives by the government, augurs well for India at G20.


[1] Notification S.O. 4720(E), September 26, 2022, available at: 239378.pdf (egazette.nic.in)

[2] Supreme Court on the admissibility of electronic evidence under Section 65B of the Evidence Act, Cyril Amarchand Mangaldas, Bharat Vasani & Varun Kannan, January 27, 2021, available at: Supreme Court on the admissibility of electronic evidence under Section 65B of the Evidence Act. | India Corporate Law (cyrilamarchandblogs.com)

[3] See: NeSL- National E-Governance Services Ltd » DDE

[4] Section 54, 59 of Transfer of Property Act, 1882

[5] Maharashtra to protect property e-registration agreements with blockchain technology, Indian Express, September 7, 2022, available at: https://indianexpress.com/article/cities/mumbai/maharashtra-to-protect-property-e-registration-agreements-with-blockchain-technology-8135241/

[6]RBI Discussion Paper on Climate Risk and Sustainable Finance, July 27, 2022, available at: https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/CLIMATERISK46CEE62999A4424BB731066765009961.PDF