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Alchemy of Business, Financial and Technology Law

By Niyati Nagar

Introduction to Business and Financial Laws

Business law by its content is the counterpart of commercial or mercantile laws and is that branch of law that deals with the effective governance of the relation and activities between the entities engaged in business affairs. It tends to regulate and settle the disputes so arising of such economic relationship. Business law encompasses within it the subject matters of licenses, securities, agency, contracts, negotiable-instruments, partnerships, corporations, sales, bailment, labor, consumer interest, business crimes, etc. Financial law is the subset that focuses on financial and banking systems, commercial banks, insurance, investments, and management sector and thus narrowly governs financial transactions and markets in an economy.

Business Law as a term originated only in the common law systems particularly in the United States of America because of the reasons, A) in common law regions commerce is confined to exchange of goods for money and does not include all the economic activities; B) “economic law” as originated in Germany is not so common in market economies and is understood as ‘legal administrative framework’ regulating the economic activities; C) the time when business law was emerging in common law countries, the social property as a proprietary basis of economic law has already disappeared.

In India, it was the Arthshastra of Kautilya compiled in 300 B.C. that for the first time comprehensively read in provisions of business law by including regulatory framework for contracts, debts, labor relations in corporations, master-servant contract, pledges, etc.[1] With the advent of the British East India Company in the 1600s, the doctrine of juristic personality of a corporation was introduced in India which is a fundamental rule of business law today. After this there has been no looking back, the Indian Contract Act so enacted in 1872 was the first enactment to govern business relations in India. Also considered the mercantile law of India it had Goods and Services Act and the Partnership Act. Later specific legislation dealing in negotiable instruments, corporations, taxation, labor relations, insurance, bankruptcy, and intellectual property, etc. evolved in India.

Introduction to the Technology Law

Since the advent of human civilization, it has been observed that the basic nature of a man is to make more progress in the sphere which he lives in. Due to rapid globalization and technological advancements taking place all over the world the use of the internet has escalated in such a manner that it has become a crucial part of life. It is interesting to note that initially the internet was available only to carry out some of the military operations in the United States[2] however, it saw its growth by venturing into each and every sphere be it healthcare, commerce or any other fields. A plethora of legal issues and questions has been raised due to the rapid development of the internet, and a lot of them concerns the business transactions and/or trade.

The novel communication applications and digital technology has now acquired the whole space of our daily living, which includes the instruments of daily business transactions. Businesses have shifted to computers while recording, transmitting, and creating their services. There are both financial and quality benefits of this shifting, but due to lack of appropriate legal framework in India a large section of the population seems reluctant in conducting online business and making online purchases. The principle hurdle while looking into the aspects of e-commerce i.e., online businesses was of the legal recognition and the poor digital infrastructure; however this was duly realized by the Government of India. It was only in the recent years at the international level, that the observation of the international trade being mostly carried out in the form of electronic Communications and the electronic mail raised a momentum and an imminent need to recognize electronic records. Hence, a data which is stored in the computer or any external storage attached was accorded due recognition. In furtherance to this, the model law on E-Commerce was adopted by the United Nations Commission on International trade in the year of 1996.[3] Subsequently, the General Assembly of United Nations passed resolution in the year of 1997[4] pursuant to which a recommendation was made to all the states in the United Nations to give favorable consideration to the model law, which basically provided that all the electronic records and communication should be given recognition at par with the paper evidence.

With this international development the Parliament of India discussed a unique bill, comprising the regulations for the cyber space including the civil and criminal obligations and liabilities, respectively. This Bill was later formulated into legislation as the “Information and Technology Act, 2000”. Fundamentally, the Act defines and elaborates on some of the few Cyber crimes and lays down the punishment thereof. Legal recognition of electronic documents, legal recognition of Digital signatures offences and contraventions regarding the same and the system of justice dispensation for Cybercrimes lies at the heart of the Information Technology Act. However, it becomes imperative to note that the Act was drafted in the age when internet penetration in India stood at around 0.5%.[5] The Act was not formulated in such a way so as to include the technology such as cloud, AI etc. The complexity increases further when there comes multitude of social media platforms and unregulated contents.

The Interface

With the enactment of the Information and Technology Act, 2000 and the later amendment of 2008 nearly all kinds of business transactions have been encircled as governing under the IT Act, 2000. However, despite such inclusions as noted above the scope of business and the law thereof is vast and there are technological developments other than in simple trade or exchange transactions in special legislations like labor relations, taxation, securities, etc. which require attention of the academicians and government. The digital environment is yet evolving and so does the law should.

Here is the link to some specific legislation under the broad subject of business, financial and technology laws in India (not exhaustive):

References

[1] Balbir S. Sihag, Kautilya on Law, Economics and Ethics, 25 (1), Humanomics, 75-94 (2009).

[2] VINT CERF, A brief history of the internet and related networks: Internet Society, in 1973, the U.S. Defense
Advanced Research Projects Agency (DARPA) commenced a research program so as to investigate the
technologies amongst the packeted network of numerous kinds.

[3] United Nations Commission on International Trade Law Model Law on e- Commerce, 12th June 1996,
https://www.uncitral.org/pdf/english/texts/electcom/05-89450_Ebook.pdf.

[4] UNCITRAL Model Law on e-Commerce with Guide to enactment, 1996, 1998,
https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/19-04970_ebook.pdf.

[5] CSO India: ‘INDIA’S IT ACT, 2000 A TOOTHLESS TIGER’ Internet penetration in India currently stands at
over 40 percent and is projected to reach 627 million users by the end of 2019.

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