IMPORTANCE OF
DIGITAL SIGNATURES IN TRADE AND INDUSTRY
M.Y.
Siddiqui *
The Depositories
Act, 1996 has been enacted by the Government to help paperless
depository work in order to enable safe and speedy transfer of
securities. It is meant to build and strengthen the confidence
of investors in the capital market. The paper-based ownership
and transfer of securities has been a major drawback of the Indian
securities market as this often resulted in delay in settlement
and transfer of securities market as this often resulted in delay
in settlement and transfer of securities leading to bad delivery,
theft and forgery causing hardships to the investor. The legal
framework in this regard reflects changes in ownership records
through book entry, dematerialization of securities in the depositories
mode and enabling free transferability and exemption on transfers
of shares within a depository from stamp duty.
Accordingly,
consequential amendments in the Companies Act, 1956, Income Tax
Act, 1961, Securities Contracts (Regulation) Act, 1956, Indian
Stamp Act, 1899, Benami Transactions (Prohibition) Act, 1988 and
Securities and Exchange Board of India Act, 1992 have been effected
to make them compatible with the Depositories Act, 1996 and later
with the Information Technology Act, 2000. The objectives are
to attain paperless system with an attendant secrecy to maintain
and build up confidence of investors in all financial and trade-related
transactions and save them the trauma of fraudulent misconduct
of unscrupulous elements in the business world.
The Information
Technology Act, 2000 envisages a regime of digital signatures
certification. But it is yet to fructify fully. Although the Controller
to oversee the implementation of digital signatures certification,
electronic filing of records, annual returns and other documentation
is in position, it will take a little more time before the digital
signatures begin in India fully. Digital signature provides authentication
of electronic records, which are to be effected by the use of
asymmetric crypto system and hash function known as Public Key
Infrastructure (PKI). Legal recognition of digital signatures
has been approved within the framework of the IT Act. Accordingly,
affixing digital signature on electronic records is as good as
putting manual signature on document. Besides, digital signature
serves as authentication technique. It also serves as the digital
equivalent to manual transaction. Along with this, the IT Act
also recognizes electronic records, such as, information or any
other matter in electronic form. This is as good as information
in the written, typewritten and in printed form. Added to this,
the use of electronic records and digital signatures in Government
and its agencies has been approved as a policy matter within the
meaning of IT Act which is yet to bloom fully.
Granting of licenses,
permits, filing of applications, payment of charges and other
financial transactions through electronic records, when fully
implemented, will revolutionize the development of Indian trade
and industry in tune with the emerging globalization of its economy.
The Government is in the midst of developing full infrastructure
for all-round electronic transactions.
In keeping with
its professed policy, the Government of India is marching towards
paperless office. The corporate sector is already doing so. When
the infrastructure of electronic transactions and paperless work
culture permeate both the Government and the corporate sector,
the regime of digital signature will be introduced all over the
country to effect economy of scale in the management of time,
resources and space which will go a long way in increasing the
wealth of the nation.
The Government
is busy refurbishing the image and efficacy of the Securities
and Exchange Board of India (SEBI) in order to sustain the growth
of our capital market. Those in the Government and in the corporate
sector are trying to regain the past glory of our nation by creating
wealth and prosperity. For this, the whole nation has to work
like a well-coordinated unit, each institution like a processing
line and every citizen like a disciplined worker, all working
in unison to produce just one product—national wealth. It is in
this context that greater responsibility devolves on stock exchanges
to help prevent recurrence of securities scams and various corporate
frauds to ensure a sustained development of the nation.
* DPIO, PIB, New
Delhi
