The normative foundation of the proposed Personal Data Protection Bill, 2018 (hereinafter referred to as "Data Protection framework") is the outcome of the judgment passed by the Hon'ble Supreme Court of India in Justice K.S. Puttaswamy (Retd.) v. Union of India1. That vide the said judgment right to privacy has been recognized as a fundamental right emerging primarily from Article 21 of the Constitution. The Supreme Court vide the aforesaid judgment clarified that the right to privacy is not an absolute right and that a person's privacy interests can be overridden by competing State and individual interests.
In 2011, i.e. before Justice Puttaswamy judgment (supra) judgment, the Government propounded the Information Technology (Reasonable Security Practices And Procedures And Sensitive Personal Data Or Information) Rules, 2011 (hereinafter referred to as the SPD Rules), were issued under Section 43A of the IT Act. The said Rules read with Section 43A of the Act, holds only a body corporate liable for compensation for any negligence in implementing and maintaining reasonable security practices and procedures while dealing with sensitive personal data or information. However, the pace of development of the digital economy and with the advent of right to privacy being recognized as a fundamental right after the law laid down in by the Hon'ble Supreme Court in Justice Puttaswamy judgment (supra), it has become inevitable to have more elaborate laws for protecting the data of individuals.
The recent disclosure of data sharing practices by Facebook2 has placed the interests of the individual (in whose name the information flows) as secondary to the interests of the corporates which deal with the data, which has further made the requirement of having stringent norms for protection of data of the individuals.
After the decision of the Supreme Court in Justice Puttaswamy judgment (supra), a Committee under the aegis of Justice B.N. Srikrishna was constituted (popularly known as the Justice Srikrishna Committee). The Committee in its Report provides the need for propounding a Personal Data Protection Bill, as the data gathering practice in India, presently is opaque and mired in complex privacy forms that are unintelligible. The Committee opined that protecting the autonomy of an individual is critical not only for the sake of the individual, but because such autonomy is constitutive of the common good of a free and fair digital economy.
Some of the highlights of the Data Protection framework are elaborated hereinbelow:
Jurisdiction
With many companies not being based in India but carrying on business, or offering goods and/or services in India, the State has a legitimate interest in regulating the activity of collecting and processing personal data by such entities. The Committee, therefore, proposes to extend the law to all such entities processing the personal data of Indian citizens or residents.
Applicability
The data that is processed, the reasons for such processing, and security standards maintained are the critical factors to determine the applicability of the law. The Report provides that the proposed law shall not be retrospective in its Application. However, if there is any ongoing processing activity at the time the law comes into effect, then the data fiduciary (i.e. the entity collecting the data) must ensure that it is in compliance with this law in relation to that activity. This means that merely because some personal data has been collected prior to the commencement of this law, such personal data is not excluded from the application of the law.
As detailed earlier SPD Rules, limited its applicability to body corporates. However, the present Data Protection framework has considered the issue that Governments, as data fiduciaries, processes large amounts of personal data, be it related to taxation, Aadhaar, social security schemes, driving permits, etc. Unlawful processing of such data can cause significant harm to individuals. As such Governments, as data fiduciaries, must be within the remit of the law, ensuring that State respects the right to privacy of the citizen.
Processing
The Bill will cover processing of personal data by both public and private entities. Consent will be a lawful basis for processing of personal data. Furthermore, processing of personal data of children3 should be with utmost care and ought to be done with greater protection than regular processing of data.
Obligation of data fiduciaries
All processing of data must be fair and reasonable. Furthermore, the Bill imposes a limitation that only such data should be collected that is necessary for achieving the purposes specified for such processing. Thus, the minimum data necessary for achieving a purpose could be collected, and such data shall be used only for the specified purpose and other compatible purposes and no other. Furthermore, data should be stored by the fiduciary only for a time period that is necessary to fulfil the purpose for which it was collected. Once the purpose has been achieved, the data should be deleted or anonymised.
Data Breach
With large amounts of data being held by fiduciaries, breach of personal data becomes a real possibility. Currently, in India the SPD Rules, deal with data security. Thus, the Bill provides for a notification to the Data Protection Authority, upon the occurrence of such breach, before a notification to the individual is made. As propounded by the framework, the Data Protection Authority shall be a high-powered, independent national body. Such Authority shall have the power of issuing directions, power to call for information, publication of guidelines, issuance of Public Statement, Conducting enquiries, granting injunctive relief etc.
Data Principal's Right
The Bill provides that rights are based on the principles of autonomy, self-determination, transparency and accountability so as to give individuals control over their data, which in turn is necessary for freedom in the digital economy. The Bill provides the data principal with the (a) right to confirmation and access, (b) correction, (c) data portability and (d) right to be forgotten.
Transfer of Personal Data Outside India
Personal data that is maintained in India will always have the protection of India's data protection regime. However, national interest would require that at least an adequate level of protection should be accorded to personal data transferred abroad.
Cross border data transfers of personal data, other than critical personal data, will be through model contract clauses containing key obligations with the transferor being liable for harms caused to the principal due to any violations committed by the transferee. Personal data determined to be critical will be subject to the requirement to process only in India (there will be a prohibition against cross border transfer for such data). The Central Government should determine categories of sensitive personal data which are critical to the nation having regard to strategic interests and enforcement.
Allied Laws
The committee has recommended certain amendments in the Aadhaar Act 2016 and the Right to Information (RTI) act, 2005.
Offences and Penalties
Penalties may be imposed on data fiduciaries and compensation may be awarded to data principals for violations of the data protection law. Moreover, the joint and several liability to pay compensation would be attached to the data fiduciary and its processors with penalty being imposed, so long as infringement has been proven.
As per Section 69 of the Bill, where the data fiduciary contravenes any of the following provisions, it shall be liable to a penalty which may extend up to five crore rupees or two per cent of its total worldwide turnover of the preceding financial year, whichever is higher, as applicable—
- obligation to take prompt and appropriate action in response to a data security breach
- obligation to undertake a data protection impact assessment by a significant data fiduciary
- obligation to conduct a data audit by a significant data fiduciary
- appointment of a data protection officer by a significant data fiduciary
- failure to register with the Data Protection Authority
Sub-Clause 2 of Section 69 further provides that where a data fiduciary contravenes any of the following provisions, it shall be liable to a penalty which may extend up to fifteen crore rupees or four per cent of its total worldwide turnover of the preceding financial year, whichever is higher, as applicable—
- processing of personal data in violation of the provisions of the proposed framework
- violation in processing of sensitive personal data
- violation in processing of personal data of children
- failure to adhere to security safeguards, de-identification and encryption, protecting integrity of personal data, preventing misuse, unauthorized access, modification, disclosure or destruction of personal data
- violation in transfer of personal data outside India
The framework further provides for penalty for failure to comply with data principal's request, penalty for failure to furnish report, return, information etc, penalty for failure to comply with the direction or order issued by the Authority etc.
Companies such as Facebook, WhatsApp, Google, Uber, Apple, among others, may not be able to transfer and process 'sensitive personal data' of Indians to their servers abroad with the advent of the Data Protection Bill. As discussed, earlier the Bill prohibits cross-border movement of information sensitive personal data except through model contract clauses containing key obligations with the transferor being liable for harms caused to the principal due to any violations committed by the transferee. Personal data determined to be critical will be subject to the requirement to process only in India (there will be a prohibition against cross border transfer for such data).
Definition of sensitive personal data as it existed under SPD Rules, has been expanded to include passwords; financial data; health data; official identifier; biometric data; genetic data etc. Every entity collecting the data shall ensure storage of such personal data on a server located in India. To meet these expectations Entities would be required to spend huge amounts for setting up local servers in India. This will be a hurdle for the existing Companies in terms of developing the infrastructure for enabling compliance of the Law. Such a Law may also hamper small business houses from starting/ continuing their business in India.
Footnotes
1. Writ Petition (Civil) No 494 of 2012, decided on 24.08.2017
2. To elaborate, recently Facebook admitted that the data of 87 million users, including 5 lakh Indian users, was shared with Cambridge Analytica through a third-party application that extracted personal data of Facebook users who had downloaded the application. This incident demonstrated that the users did not have effective control over data. Further, they had little knowledge that their activity on Facebook would be shared with third parties for targeted advertisements around the US elections.
3. A data principal below the age of eighteen will be considered as a child
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
