Category: Legal News

Target set on “Big-Tech Platforms” with amendments proposed to the IT Rules, 2021

Target set on “Big-Tech Platforms” with amendments proposed to the IT Rules, 2021

With India having the second-highest digital consumption and internet users in the world, makes it a lucrative market and a breeding ground for various social media platforms as well as content providers. In view thereof, the need for and importance of a robust digital content-regulating legislation cannot be undermined. Enacted with an intention to provide the necessary legal framework, the Information Technology Act, 2000 (“IT Act”) and the corresponding rules have had to walk a tight rope. Between protecting the delicate rights of the “digital nagriks”, such as their freedom of speech, right to reputation, copyright in their content etc. on one hand, and, conditionally safeguarding the digital platforms from every other “questionable” content posted/uploaded by third party “nagriks”, on the other, this legislation has been put to test on several occasions. In fact, right after being notified by the Ministry of Electronics and Information Technology (“MeitY”) last year notification last year (May 2021), the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (“IT Rules”) have been mired in several litigations and controversies. Recently, on June 6, 2022, the MeitY re-published draft amendments to the IT Rules for public consultation and stakeholders’ comments, after initially withdrawing it on 2nd July, 2022 on account of an ‘editorial’ glitch. The public note accompanying the draft amendments that evidently sets the target on the ‘Big Tech Platforms” questioning their accountability is particularly interesting to note:

Putting the Interests of Digital Indians First

Proposed amended IT rules to provide additional avenues for grievance redressal apart from Courts and also ensure that the Constitutional rights of Indian citizens are not contravened by any Big-tech Platform by ensuring new accountability standards for SSMIs. …..

as the digital eco-system and connected Internet users in India expand, so do the challenges and problems faced by them, as well as some of the infirmities and gaps that exist in the current rule vis-a-vis Big Tech platform. Therefore, new amendments have been proposed to the IT Rules 2021, to address these challenges and gaps.


While the amendments proposed in the draft do not particularly appear to be an attack on the Big Tech platforms (such as Twitter, Meta’s Facebook, Instagram and Google’s YouTube, to name a few), the actual effect of the proposed amendments pose a challenge to their existing autonomy and the compliance requirements now expected of them are nothing short of onerous, making ‘due diligence’ a behemoth task. We have analyzed the four crucial amendments proposed by the MeitY and our comments on the same hereinbelow:

1. Requiring intermediaries to “ensure” that users comply with requirements in rule 3(1)(a) and rule 3(1)(b) of the IT Rules 2021

Under the existing IT Rules, an “intermediary”1, as a part of their due diligence requirement, is required to prominently publish on its website, mobile based application or both, as the case may be, the rules and regulations, privacy policy and user agreement for access or usage of its computer resource by any person. The proposed amendment additionally requires that the intermediaries shall now have to “ensure” that users comply with the said rules/policies, by: one, informing the user of the rules/policies in place, and second, “causing the user” not to host, display, upload, modify, publish, transmit, store, update or share any information that the user does not have right over or is inconsistent with the laws of the country (as prohibited under rule 3(1)(b), IT Rules).

This amendment requiring “ensuring” users’ compliance of the platform’s rules/policies and “causing” the user not to act in contravention with the provisions of the IT Act and Rules, is vague and worrisome for the following reasons:

i. CONTRADICTS THE SAFE HARBOUR PROVISION OF THE IT ACT: Section 79 of the IT Act allows the intermediaries an immunity or a “safe harbour” against liability for any third-party information, data, or communication link made available or hosted by them. However, this safe harbour is conditional, and subject to Section 79(2)-(3) of the IT Act. A platform/service will qualify for an intermediary defence only if: one, its function is limited to providing access to a communication system over which user generated content/information is hosted or temporarily stored; two, the platform does not initiate, select the receiver or modify the content of the transmission which is made or stored by third parties; and, three, the intermediary observes ‘due diligence’ and also observes other guidelines provided by the Central Government. The ‘due diligence’ to be observed have been provided under IT Rules with several landmark decisions (such as Shreya Singhal case2, MySpace case3 etc.) providing clarity as regards compliance by the intermediary. It is only logical to assume that for “ensuring” or “causing” the users’ compliance of the platforms’ privacy policy/ terms and conditions, the platform will have to now scrutinize, sift and regulate the content/information posted/uploaded by the users as a part of the “additional due diligence” requirement necessary for claiming intermediary status. This ‘additional’ due diligence shall cause the platform to lose the intermediary status right away as its function shall now no longer be ‘limited to providing access’, and the platform shall have to ‘select the receiver’ and/or ‘modify the content’ to comply with the amended rules. Evidently, the proposed amendment is in conflict with the safeguards provided to the intermediaries under the parent legislation.

ii. ABOVE AND BEYOND THE EXISTING DUE DILIGENCE REQUIREMENTS: The various decisions on ‘due diligence’ requirement of the intermediaries have settled the manner and extent to which the platforms/service providers have to act in order to be safeguarded from user (third party) generated content. The due diligence requirement is limited to publishing policies, terms and conditions, user agreement etc. for its users only informing them that they are required to comply with rule 3(1)(b). And, it is been repeatedly held that the intermediaries cannot be asked to screen or regulate content as it would fall outside the ambit of “intermediary status” as laid down in the IT Act.4 Further, it has also been well established that infringing/objectionable content can only be removed upon the intermediary “receiving actual knowledge” of such content, by way an order or direction from the court or a government agency, as laid down in Shreya Singhal case5 and/or knowledge based on specific information (such as the specific URL/s) given by the person whose work was being infringed by the content uploaded, as established in the MySpace case. If an intermediary fails to remove or disable access to the content which is unlawful upon despite actual knowledge, it shall be in breach of the due diligence threshold and would fall out of the ambit of the ‘safe harbour’ provided to an intermediary. While providing general mechanisms for identifying infringing content, such as the Rights Management Tool, Notice and Take Down provision, Take Down Stay Down tool and Hash Block Filter, have been found as effective tools for complying with the due diligence requirement of social media platforms (MySpace case), none of these existing tools appear to be technologically sufficient in “ensuring” compliance of the platforms’ policies/terms/rules in the manner proposed in the amendment. The ‘due diligence +’ requirement is not only onerous but almost impossible to meet, considering, the Big Techs have to handle a humungous amount of data/content on a daily basis.

2. Addition of rule 3(1)(m) and 3(1)(n) to respect the principles of the Constitution of India

With the laudable intent of protecting and safeguarding the rights guaranteed under the Constitution, the MeitY has proposed an addition to the ‘due diligence’ requirements whereby:

One, the intermediary shall take all reasonable measures to ensure accessibility of its services to users along with reasonable expectation of due diligence, privacy and transparency;


Second, the intermediary shall respect the rights accorded to the citizens under the Constitution of India.

It would not be an exaggeration to say that the devil lies in the lack of details. Not defining key terms in the proposed amendment above, such as “accessibility”, “privacy” transparency” and failing to elucidate what taking ‘reasonable measures’ or ‘respecting the rights’ would practically entail, makes this addition open to interpretation, confusion and invariable litigations (should the amendment come into force, as is). It is again important to flag that any regulation or sorting or control on the content/information by the platforms shall strip them of the intermediary status offering safeguards under the IT Act.

3. Changes in the grievance redressal mechanism of the intermediary under rule 3(2)

The existing mechanism entails acknowledgement of a complaint by the Grievance Officer within 24 hours, followed by its disposal within 15 days of receipt. The amendment clarifies that the complaint includes requiring actions where a user or user account is to be suspended, removed or blocked, or an information or communication link is requested to be suspended.

The amendment has further proposed that where the nature of the complaint requires an information or communication link to be removed, it shall be required to be acted upon and redressed within 72 hours of reporting, with ‘appropriate safeguards’ ‘to avoid any misuse by users’. While the objective of the timeline appears to preventing objectionable/unlawful content’s proliferation (i.e. going viral), there are several practical issues that Big Techs may face:

For starters, it has been acknowledged time and again that Big Techs deal with massive amounts of data daily and consequently, several complaints are raised each day. The redressal timeline of 72 hours may be quite onerous. Further arises the question, whether a delay in meeting with said timeline (by say, a few hours) would strip the platform of the intermediary status?

Secondly, requiring take down of content in such a short time may result in more removals to err on the side of caution, thereby resulting in stifling the free speech that the said amendments were proposed to safeguard in the first place.

Lastly, the “appropriate safeguards” that intermediaries are expected to put in place to avoid misuse of the proposed mechanism by users need to be clarified further. Most intermediaries would not have the wherewithal in the first place to set up such complex technological measures/tools. That, with lack of clarity on what is considered “appropriate” or “sufficient” makes the entire task an uphill one for the platforms/service providers.

4. Creating a new Grievance Appellate Committee to provide an appeal mechanism to users:

The constitution of the Grievance Appellate Committee – which allows the persons aggrieved from the decision of the Grievance Redressal Officer of the intermediary to approach them in appeal – instead of moving to a court of law, is not problematic per se. It provides an alternative forum to file appeals, without taking away the right to move to the court, irrespective.

What is disconcerting however, is that there is no clarity provided under the (draft) rules regarding the constitution of the Committee, the scope of their jurisdiction and powers, the nature of the proceedings, the procedure they would follow and the binding nature of their orders/directions etc.. Most importantly, it is unclear if the intermediary shall also be given an opportunity to present their case in an appeal before the Committee. If not, how shall the intermediary be made to comply by the orders/directions, how would principles of natural justice be upheld without giving a necessary party opportunity to be heard and would that not result in a waste of time and resources, and wouldn’t this invariably lead to appeals before the courts, putting the very purpose of the Committees constitution into question.

To sum up, the draft amendments as they stand today, have validly caused an upheaval among the intermediaries and relevant stakeholders, and are bound to face resistance from the industry. In what shape would the IT Rules, 2021 be notified as amended, after due consultations, is only a matter of time; however, in the present form, the proposed amendments are set to upturn all the developments that laws related to intermediaries have seen thus far and are bound to result in a multitude of litigations on their validity.


Keeping up its reputation as the land of true opportunities, Japan has always attracted potential entrepreneurs looking to expand their horizons in the field of technology and business. Japan has managed to turn themselves into a huge industrial and commercial hub. Japan is the centre of many companies like Honda, Sony, and Panasonic to jump-start their business and over the decades, turn into global giants.

The Japanese Government has continuously endeavored to relax business regulations in order to encourage citizens as well as non-residents to start-up their businesses in Japan. Foreign residents wanting to set-up a business in Japan are required to hold a manager visa, which serves as a legal permit for operating and starting commercial activities in the country.

Before 2013, foreign entrepreneurs were required to comply with various stringent norms, such as either employing minimum two full-time employees, or investing a minimum capital of ¥5 million in their business, and also, they had to secure office space in Japan. But, now, Tokyo Metropolitan Government (TMG) has started providing a six-month preliminary business visa, enabling foreign entrepreneurs to visit, explore and set up a base for starting up their businesses in Japan. This short-term permit provides sufficient time to complete the required paper work, get settled and grow businesses without any undue pressure while participants are in Japan. This visa is renewed at the end of the six months, provided the project is progressing smoothly and that all conditions have been successfully met.

Japanese government has established Special Business Zones in its metropolitan cities such as Tokyo, Osaka, and Nagoya. There are numerous benefits of starting up a business in Japan. Japan offers an exciting yet stable business market which is open to trade and foreign investment. Moreover, Japanese market is globally very competitive, especially in the fields of environment, healthcare, IT and automotives. Furthermore, Japan has a highly educated and affluent population which makes them discerning consumers. Loyalty and cooperation are valued by Japanese people over aggressiveness and competitiveness. Being a predominantly collective society, each individual often feels a strong sense of belonging and responsibility towards their work place.

Foreign companies wishing to set up a business in Japan have three choices regarding the modes of business operation; they can either open a representative office, a branch office or a subsidiary office.
Representative office doesn’t require any registration and is established for carrying out supplemental work only. A representative office, however, cannot ordinarily open bank accounts or lease real estate in its own name, so agreements for such purposes must instead be signed by the head office of the foreign company or the representative at the representative office in an individual capacity.

The branch office can begin its business operations as soon as an office location is secured. A branch office does not have its own legal corporate status. The foreign company is ultimately responsible for all debts and credits generated by the activities of its Japanese branch office. A Japanese branch office, however, may open bank accounts and lease real estate in its own name.

A foreign company establishing a subsidiary company in Japan has to establish such subsidiary company either as a joint-stock corporation, a limited liability company, or a similar entity stipulated by Japan’s Companies Act. But, owing to its unlimited liability, it is not a common preference of foreign entrepreneurs.

According to Japanese Market, foreign entrepreneurs are usually advised to set up a limited liability company, because it ensures equity participation.

Opening a local bank account is also a pre-requisite, for depositing the funds in Japan. Earlier, it used to be necessary to have a Japanese resident as a representative director of the company, but now, after the amendments made by the government, it is no longer required to have a representative director. Thus, it has become easier for the non-residents to start-up their business in Japan.

The Japanese Government has also been actively promoting foreign investment since the past few decades. Various treaties and deals have been signed by the Japanese government with other countries in order to provide subsidies and favorable work conditions to foreign start-ups. The government has also established “Tokyo One-Stop Business Establishment Centre” to provide one-stop services to start ups for complying with necessary procedures for starting up businesses in Tokyo.

To sum up, Japan has come a long way in recent years in order to ease the business of setting-up and to promote entrepreneurship.

Investing in Start-ups- Things to Look Out For

“I see startups, technology and innovation as exciting and effective instruments for India’s transformation.” ~ Shri Narendra Modi
Since the announcement of “Start-up India” scheme by Prime Minister Narendra Modi in his 2015 Independence Day Speech, there has been a lot of buzz among the small entrepreneurs, investors, VC’s, and management groups leading to a new era of startup evolution in India. To begin with, India is the world’s youngest start-up nation with 72% young founders who are less than 35 years old. The “Start-up India” campaign further shows the Indian government’s intent in understanding the value of startups and boosting innovation culture in a youthful and emerging economy. This thrust in the Indian startup systems holds great promise for every sector, especially for the crucial areas of education, healthcare, employment, and agriculture.
The action plan for start-up India promises an abundance of benefits to innovation driven ventures including funding support through corpus of INR 10,000 crore; credit guarantee fund for Startups by the govt.; tax exemption on capital gains of Start-Ups; complete tax exemption to Startups for their first 3 years; and further tax exemption on investments above fair market value. Besides the financial support “Start-up India” provides for the development of several Incubators and other support systems needed for start-ups to flourish.
India has come a long way from the initial days of bootstrapping when the major chunk of the initial investment for businesses came from the initiator’s personal saving, and support from friends and family. But with the advent of government initiatives promising incentives for start-ups to lay the company foundation, the role of the investors would also be extremely valuable. The actual impetus that propels a young enterprise forward is the infusion of necessary funds into its system either by the Angel Investors, venture capital funding, ultimately leading to generation of funds by private equity means and finally launching IPOs. Keeping the above in mind, the total funding in Indian startups was estimated to be close to $5 billion by the end of 2015.
Investing in startups is quite uncertain and can prove to be a risky affair, especially when the idea doesn’t take off as planned leaving the investor stranded and penniless. Having said that, there is absolutely no doubt that investing in a start-up can also be very incentivizing as well. The reason why an investor needs to be extra vigilant while pouring in his bit into a start-up is because such companies are saplings playing with ideas looking at a prospective product, which in most cases don’t have a commercially tested product or solid customer foundation. Therefore, the start-up investor must critically evaluate the business plan and the model for generating profits and growth in the future.
  • Broadly the essential things that must be pondered upon while looking to invest in start-ups should be: evaluation of suitable risk
  • likelihood of profitability
  • equity stake available in exchange for capital
  • market evaluation especially checking the viability of competitors
  • legal and regulatory compliances
Before investing in a start-up one must ascertain the domain of startups that they might be interested in and then zero down on the company that deserves the investor’s money.
Three aspects of a Start-Up must resound the philosophy of a start-up investor:
  • Idea;
  • Intellectual potential; and
  • Individuals contributing to the Start-up.
After deciding on what company to invest into, one must ascertain the timing and type of entry into the system. Depending on the equity share and willingness to be a part of the decision-making, types of participation can be grouped as angel investment, venture capitalist or crowd-funding. It is also important to evaluate the potential return on investment (ROI) and time frame needed to maximize the profits.
Taken the other way around, when a start-up holds an original product/service but does not adequately safeguard their respective IP; then markets such a potent product without developing a strong IPR strategy to monitor and back up sales, not only does it expose the product to plagiarism but also loses out on precious market share and boosted sales due to loss of originality.
Besides the above listed “diving in” investment considerations, an investor should also chalk out an exit plan. A healthy exit strategy is very important for an investor since it is imperative for them to known the time frame when one would be able to withdraw the initial investment and its related profits.
In the end, an investor must remember that investment demands patience and one should be more oriented on the long term prospects rather than short term gains in order to maximize output. Also, as they say, “Don’t put all your eggs in one basket”, the sound investor always focuses on having a diversified investment portfolio. The more the diversification of your startup investment, the greater are the chances of hitting gold in a relatively short time-frame.
~ Happy Investing!
Article By: Vineet Sharma – Vice President (Patent Analysis)