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Dec 27, 2022

Arbitrary Device Seizures Could Turn Corporate Investors Away From India

International standards already exist and the government should waste no time in adopting them.
Illustration: Pariplab Chakraborty

Amazon has moved the Supreme Court seeking to restrain the Enforcement Directorate from forcing its employees to hand over their devices and data. A body of journalists has sought guidelines from the Supreme Court to circumscribe the absolute discretion of the agencies in seizing and retaining data.

Their custody is not known to be data-secure.

Information about investigations regularly leaks out, and proprietary data may well reach the public sphere from police, ED or Central Bureau of Investigation custody. The investigators would face no consequences.

‘The fruit of the poisoned tree’ is the US legal doctrine according to which any evidence, no matter how relevant, is discarded if it is the result of an illegal search. Not only does the US require strong ‘probable cause’ to issue warrants for seizure, they also specify how much of the data on a seized device can be retained, and under what conditions, to ensure confidentiality and data safety. The UK legal system protects privileged material from search and seizure, unless absolutely necessary for an investigation, which has to be proven before a judge. Even then, it has to be maintained confidentially and returned as soon as possible.

The Indian system does not exclude illegally obtained evidence. The evidence simply has to be relevant and admissible as per the Indian Evidence Act.

Apart from individuals, this is a matter of concern for businesses with proprietary information ― their systems can be seized by the local police or agencies that regularly access all data on devices, regardless of what the investigation is about. The investigation may be about non-supply of goods or services, but the entire hard drives and phones of key personnel are routinely seized. No company or individual ought to be subjected to such invasive state action.

Also read: Stan Swamy’s Laptop Was ‘Planted’ With Incriminating Documents, Says New Forensic Report

Amazon has instituted its plea in the Supreme Court, related to an alleged FEMA violation in 2014. The Foreign Exchange Management Act is a matter of application of law and technicalities regarding the movement of funds across borders. It needs no traditional investigation. The issue concerns compliance and the seizure of devices is incomprehensible. Without a proper system to govern such seizures and to protect the private data of individuals and the proprietary data of corporations, the fundamental right to privacy will remain in peril.

China had to reform its Intellectual Property Rights regime to attract foreign business. Western companies are still cautious about breaches of their proprietary technologies and the Chinese government is further refining its systems to ensure protection. India is far behind China in attracting FDI.

Amazon has not only expressed its apprehension regarding the ED’s high handedness, its former top seller Cloudtail has also complained about Competition Commission officials illegally detaining staff during their investigation regarding alleged favouritism shown by Amazon towards Cloudtail.

Regulatory powers cannot be used to bully. The effect on businesses, both Indian and multinational, will be adverse. India’s big advantage over China, of being a constitutional democracy founded on the rule of law, is the biggest guarantee of the freedom to operate and innovate. If corporations think that their proprietary data is not safe in India, they may not leave, but they will move their innovations to other countries. India will only be a market, not a base.

For multinationals – which are traditionally risk-averse about antagonising state agencies – to approach the Supreme Court regarding criminal investigation processes betrays a grave degree of concern. A company has its trade secrets and confidential business strategies and patents. Individuals have all these rights, as well as deeply private information.

If any officer of the police, the ED or CBI, or even the Income Tax Department, can seize such information without restrictions, it poses a grave risk to the economy. India will not be a preferred destination for business or travel. We will just be a market to be exploited, while those countries which offer the protection of law will be the recipients of the planning, investment and innovation which drive economic growth.

International standards already exist and the government should waste no time in adopting them. If the government does not act, the Supreme Court has the power to read such restrictions into the law. This cannot happen soon enough.

Sarim Naved is a Delhi-based lawyer.

This piece was first published on The India Cable – a premium newsletter from The Wire & Galileo Ideas – and has been republished here. To subscribe to The India Cable, click here.

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