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Here’s what companies can and cannot do as per India’s Data Protection Bill

In case of failure to fulfil the obligations outlined in the bill, companies can be fined anywhere between Rs 50 crores to Rs 250 crores depending on the nature and severity of the non-compliance. 

Written with inputs from Sarvesh Mathi.

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The Digital Personal Data Protection (DPDP) Bill, 2023, tabled in the parliament on August 3, 2023, requires companies to present a notice to users and seek consent before processing any personal data, maintain the accuracy and completeness of the personal data, implement safeguards to prevent data breaches, delete personal data once the purpose is served, set up a grievance redressal mechanism, among other things. In case of failure to fulfil these obligations, companies can be fined anywhere between Rs 50 crores to Rs 250 crores depending on the nature and severity of the non-compliance. 

As per the Bill, a company is considered a Data Fiduciary (called entities hereon), which is defined as “any person who alone or in conjunction with other persons determines the purpose and means of the processing of personal data.” 

Additionally, a Data Processor is defined as “any person who processes personal data on behalf of a Data Fiduciary.”

Read full summary of the bill here.

Seeking consent and presenting notice

Consent and legitimate uses: Entities can process a user’s personal data only for a lawful purpose that the user has given consent to or for “legitimate uses” as laid out in the Bill. We’ve covered what qualifies as “legitimate uses” separately here.

Informing users with a notice: When seeking explicit consent, entities must present a notice to the user, which should be in clear and plain language, containing a description of personal data that will be collected, and the purpose for processing this personal data. The notice should also contain the manner in which the user may exercise their rights and how to make a complaint to the Data Protection Board.

Consent must be free, specific, informed, and affirmative: The consent must be a “freely given, specific, informed and unambiguous indication” of the user’s agreement, made with a clear affirmative action to the processing of her personal data for the specified purpose.

Consent is limited to the purpose specified in the notice: The 2023 Bill states that an entity may only process personal data “for the specified purpose and limited to such personal data as is necessary for the specified purpose.” 

It can be argued that this phrasing for purpose limitation is better than the 2019 version’s clause that allowed the processing of data that is “incidental or connected” to the purpose provided to the user and the 2022 version, which did not have any limitation spelt out.

In a previous MediaNama discussion, a discussant had stressed the importance of purpose limitation by saying, “It shouldn’t be that once it’s [consent for processing personal data] out the door, anyone anywhere can do whatever they want with it because effectively, that’s the difference between it being my data, and the data of the organization that collects it from me for serving a purpose of which I’m allowing it to do.”

What should be shown in the notice? The 2018 version had the following detailed list of what sort of information should be given to the user in these notices: 

  • Purposes for data processing; 
  • Categories of data collected; 
  • Identity and contact details of the data fiduciary and data protection officer;
  • Basis for processing data under Sections 12-17 and 18-22 of the 2018 Bill (and consequences of failing to provide such data);
  • Source of data collection, if the personal data is not collected from the data principal;
  • Individuals or entities with whom personal data may be shared;
  • Potential cross-border transfers of personal data; 
  • Period of data retention (if unknown, criteria for determining this period must be conveyed);
  • Right to withdraw consent and the procedure to do so, existence of and procedure for exercising data principal rights (in the case of consent-based processing);
  • Procedure for grievance redressal, existence of a right to file complaints to the Data Protection Authority
  • “Data trust scores” assigned to the data fiduciary;
  • Other information specified by the Authority.

However, we do not see such details in the latest version of the Bill. Instead, the 2023 Bill only requires entities to show what data is collected and for what purpose. Last year, the Internet Freedom Foundation (IFF) criticised the 2022 Bill for not requiring entities to inform users when their data is shared with third parties, the duration for which their data will be stored and if their data will be transferred to other countries.

“Unlike previous iterations of the bill, it does not require data fiduciaries to inform principals about the third parties with whom their data will be shared, the duration for which their data will be stored and if their data will be transferred to other countries. Thus, data fiduciaries can continue to obtain the consent of principals by providing limited information and then using their personal data in a manner principals might not have anticipated,” said IFF.

Entities can involve Data Processors and other third parties without user consent: Notably, the notice does not have to mention if the entity is sharing data with any third party, a data processor, for example. The 2023 Bill merely says an entity can engage, appoint, use or otherwise involve a Data Processor to process personal data under a valid contract. 

In the 2022 version, an entity was allowed to share, transfer, transmit the data with another entity or involve a Data Processor only when “consent of the [user was] obtained.” With this clause removed, users will now give consent without knowing who all the data is going to be shared with.

Using Consent Manager to manage consent: Users can give, manage, review or withdraw their consent through a Consent Manager. Consent Managers are accountable to the users and must be registered with the Data Protection Board of India. 

The burden of proof lies with the entity: If challenged in the courts, entities will have to prove that a notice was given and consent was obtained from the user to carry out the processing of personal data.

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Other important obligations of companies

Preventing and notifying personal data breaches: Entities must protect personal data under their control or under the control of Data Processors engaged by them by taking “reasonable security safeguards to prevent personal data breach.” In case of a data breach, the Data Protection Board of India and each affected user must be notified.

The IFF last year called the requirement for entities to inform users in case of a data breach a welcome change. “A significant issue with previous iterations of the bill was that they did not require data fiduciaries to notify data principals in the event of a breach. Thus, users whose data has been breached, would not have even known that their data has been compromised. Clause 9(3) of DPDPB, 2022 addresses this concern by mandating fiduciaries to notify the Board and Data Principals whenever there is a breach, irrespective of its nature. Clause 20(3) then empowers the Board to issue directions to Data Fiduciary to adopt urgent measures to remedy personal data breach or mitigate any harm caused to Data Principals,” IFF noted.

For more on the provision around data breaches, check out our detailed post here.

Erasure of personal data once the purpose is served: Entities must erase the personal data once the user withdraws their consent or as soon as it is reasonable to assume that the specified purpose is no longer being served, whichever is earlier, unless retention is necessary for compliance with any law. The entity must also ensure that the Data Processors involved erase the data.

The purpose is no longer being served, if the user, for such time period “as may be prescribed,” does not:

  • approach the Data Fiduciary for the performance of the specified purpose,
  • exercise any of her rights in relation to such processing.

In the 2022 version of the Bill, entities could retain data for “business or legal purposes.” This was criticized for being worded too broadly. While the business aspect has been removed from the clause above, we are not completely out of the woods yet, due to exemptions included in the latest Bill relating to business activities like mergers, etc. (covered below).

Appointing a Data Protection Officer or contact person: Entities must publish the business contact information of a Data Protection Officer or a person who can answer questions that a user might have about the processing of their personal data. For Significant Data Fiduciaries, it’s Data Protection Officers, for others, it can be any other officer.

Maintaining the accuracy of data: If the personal data processed by an entity is likely to be used to make a decision that affects the users or if the data is going to be shared with another entity, then the entity should ensure the “completeness, accuracy and consistency” of the personal data.

Grievance redressal mechanism: Entities must establish an “effective mechanism” to redress the grievances of users.

Penalties for non-compliance with the above obligations

Failure to take reasonable security safeguards to prevent personal data breach: Up to ₹250 crores.

Failure to notify the Board and affected Data Principals of a personal data breach: Up to ₹200 crores.

For all other non-compliances under this Act: Up to ₹50 crores.

This is the same as the 2022 Bill, but different from the 2021 and 2019 Bills, both of which capped the maximum at ₹15 crores or 4% of the global turnover, whichever is higher. 

The exact amount of penalty will be determined by the Data Protection Board of India based on a variety of factors.

The Board can also recommend the government block access to an entity’s website or content in case of repeated offences or in the “interests of the general public.”

Distinguishing a data fiduciary from a significant data fiduciary

The Bill creates a special class of entities known as significant data fiduciaries based on the assessment of relevant factors like the volume and sensitivity of the data being processed, the risks to user rights and electoral democracy, the impact on India’s sovereignty, security, public order, etc. 

Significant data fiduciaries have additional duties under the Bill. 

  • Appoint a Data Protection Officer: This person will represent the Significant Data Fiduciary, be based in India, and be responsible to the Board of Directors or similar governing body. This person will also serve as the “point of contact” for the grievance redressal mechanism.
  • Appoint an independent data auditor: This person will evaluate the compliance of the Significant Data Fiduciary with the provisions of this Act.
  • Data Protection Impact Assessment and periodic audits: Data Protection Impact Assessment is defined as “a process comprising the description, purpose, assessment and management of risk to the rights of Data Principals, and such other matters with respect to the processing of personal data as may be prescribed.”
  • Other measures “as may be prescribed” later.

Penalty for non-fulfilment of these obligations by a Significant Data Fiduciary: Up to ₹150 crores.

Under the 2021 Bill, Significant Data Fiduciaries had to maintain accurate and up-to-date records of important operations in the data life-cycle, review of safeguards, etc. This is no longer required.  The 2021 Bill also considered adding all social media platforms as Significant Data Fiduciaries. This is no longer an explicit criterion, but large social media platforms may nevertheless come under this category because they qualify for the other criteria. 

Obligations for processing children’s data

When processing the personal data of anyone below the age of 18, entities have to undertake additional measures, which we’ve covered separately here.  

Failure to fulfil the obligations in relation to processing data of children can attract a penalty of up to ₹200 crores.

What are the grounds for exemptions to the above obligations?

  1. Exemptions to government: The government has broad powers to exempt itself from all provisions of the Bill, which we’ve covered in detail here.
  2. Exemptions for startups and certain classes of entities by notification: The Central Government has the power to issue a notification exempting certain entities or a class of entities, “including startups”, based on the volume and nature of personal data they process, from certain provisions of the Bill:
  • Issuing notice before seeking consent.
  • Ensuring accuracy and completeness of personal data.
  • Erasing personal data after the purpose is served or consent is withdrawn.
  • Obtaining verifiable parental consent before processing a child’s data. 
  • Not engaging in behavioural tracking of children or targeted advertising directed at children. 
  • All obligations of Significant Data Fiduciaries.
  • User’s right to information about personal data.
  1. Exemptions for certain use cases: The Bill exempts entities from provisions of Chapter 2 (obligations of Data Fiduciaries) except sub-sections 1 and 5 (provision related to securing data) of Section 8; Chapter 3 (rights and duties of Data Principals); and Section 16 (transfer of personal data outside India) of this Act when:
  • Enforcing any legal right or claim: “The processing of personal data is necessary for enforcing any legal right or claim.”
  • By courts or tribunals: “The processing of personal data by any court or tribunal or any other body in India which is entrusted by law with the performance of any judicial or quasi-judicial or regulatory or supervisory function, where such processing is necessary for the performance of such function.”
  • Law enforcement purposes: “Personal data is processed in the interest of prevention, detection, investigation or prosecution of any offence or contravention of any law for the time being in force in India.”
  • Personal data of those outside India: “Personal data of Data Principals not within the territory of India is processed pursuant to any contract entered into with any person outside the territory of India by any person based in India.”
  • Mergers and amalgamations: “The processing is necessary for a scheme of compromise or arrangement or merger or amalgamation of two or more companies or a reconstruction by way of demerger or otherwise of a company, or transfer of undertaking of one or more company to another company, or involving division of one or more, approved by a court or tribunal or other authority competent to do so by law for the time being in force.”
  • Debt recovery: “The processing is for the purpose of ascertaining the whereabouts, financial information and assets and liabilities of any person from whom a claim is due against a debt owed by her, subject to such processing being in accordance with the provisions regarding disclosure of information or data in any other law for the time being in force.”

To explain this exemption, the Bill gave the example, “X, an individual, takes a loan from Y, a bank. X defaults in paying her monthly loan repayment instalment on the date on which it falls due. Y may process the personal data of X for ascertaining her financial information and assets and liabilities.”

In the 2022 version, the last two purposes (mergers and debt recovery) were included under deemed consent. By putting these under exemptions, the Bill gives entities more leeway in processing data for these purposes.

  1. Exemption for research, archiving, and statistical purposes: The Act does not apply to the processing of personal data “necessary for research, archiving or statistical purposes if the personal data is not to be used to take any decision specific to a Data Principal and such processing is carried on in accordance with standards specified by the Central Government by notification.”
  2. Exemptions to any provision for a certain period of time: Within five years from the date of commencement of this Act, the Central Government may issue a notification declaring any provision of this Act shall not apply to any entity or classes of entities for such period as may be specified in the notification.

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Written By

I'm interested in the shaping and strengthening of rights in the digital space. I cover cybersecurity, platform regulation, gig worker economy. In my free time, I'm either binge-watching an anime or off on a hike.

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