The law as enacted is transformational. It has a broad scope of application, borrowing from the EU’s General Data Protection Regulation (GDPR) approach when defining “personal data” and extending coverage to all entities who process personal data regardless of size or private status. The law also has significant extraterritorial application.

• The DPDP creates far reaching obligations, imposing narrowly defined lawful grounds for processing any personal data in a digital format, establishing purpose limitation obligations and their corollary – a duty to erase the data once the purpose is met, with seemingly no room left for secondary uses of personal data.
• At the same time, the law provides significant exceptions for the central government and other government bodies, the degree of exemption depending on their function (such as law enforcement).
• It is important to note that the law will not come into effect until the government provides notice of an effective date.

 

1. The DPDP Act Applies to “Data Fiduciaries,” “Significant Data Fiduciaries,” and provides rights for “Data Principals” 

The DPDP Act seeks to establish a comprehensive national framework for processing personal data, replacing a much more limited data protection framework under the IT Act and rules that currently provide basic protections to limited categories of “sensitive” personal data such as sexual orientation, health data, etc. The new law by contrast covers all “personal data” (defined as “any data about an individual who is identifiable by or in relation to such data”) and does not contain heightened protection for any special category of data. The definition of “personal data,” thus, relies on the broad “identifiability” criterion, similar to the GDPR. Only “digital” personal data, or personal data collected through non-digital means that have been digitized subsequently are covered by the law.

The DPDP Act uses the term “data principal” to refer to the individual that the personal data relates to (the equivalent of “data subject” under the GDPR). A “data fiduciary” is the entity that determines the purposes and means of processing of personal data, alone or in conjunction with others, and is the equivalent to a “data controller” under GDPR. While the definition of data fiduciaries includes a reference to potential joint fiduciaries, the Act does not provide any other details about this relationship.

The definition of fiduciaries does not distinguish between private and public, natural and legal persons, technically extending to any person as long as the other conditions of the law are met.

Specific Fiduciaries, Public or Private, Are Exempted or May Be Exempted from the Core Obligations of the Act

The law includes some broad exceptions for government entities in general, and others apply to specific processing purposes. For instance, the law allows the government to exempt activities that are in the interests of the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, maintenance of public order, or preventing incitement to commit crimes if it provides notice of the exemptions. Justice Srikrishna, who as the head of an expert committee set up to recommend a data protection law in India led the creation of the 2017 first draft of the law, has been critical of these government exemptions, as have been several Members of Parliament during the legislative debate.

Some targeted exceptions also apply to companies, and are either well defined in the law or left to the government for specification. Under what can be called an “outsourcing exception,” the Act exempts companies based in India who process the personal data of people outside of India pursuant to a contract with a company based outside of India from core DPDP obligations including the rights of access and erasure normally held by data principals. Instead, such companies are largely required to only comply with data security obligations.

In addition, the government is empowered to exempt any category of data fiduciaries  from some or all of the law, with the DPDP itself referring to “startups” in this context. These are fairly broad provisions and do not include any guidance on how they will apply or who could benefit from them. The government will need to make a specific designation for this exception to operate.

Significant Data Fiduciaries Have Significant New Obligations, such as DPOs, DPIAs and Audits 

The DPDP Act empowers the Government to designate any data fiduciary or class of data fiduciaries as a “Significant Data Fiduciary” (SDF), which is done using a series of criteria that lack quantifiable thresholds. These factors range from assessing characteristics of the processing operations (volume and sensitivity of personal data processed and the risk posed to the rights of data principals), to broader societal and even national sovereignty concerns (potential impact of the processing on the sovereignty and integrity of India; risk to electoral democracy; security of the state; and public order).

The designation of companies as SDFs is consequential, because it comes with enhanced obligations. Chief among them, SDFs will need to appoint a Data Protection Officer (DPO), who must be based in India and be the point of contact for a required grievance redressal mechanism. SDFs must also  appoint an independent data auditor to carry out data audits and evaluate the SDF’s compliance with the DPDP Act, and to undertake periodic Data Protection Impact Assessments.

It is important to note that appointing a DPO is not an obligation for all data fiduciaries. However, all fiduciaries are under an obligation to establish a “readily available” mechanism for redressing grievances by data principals in a timely manner. In order for such a process to be operationalized, usually an internal privacy compliance function or a dedicated privacy officer would be helpful.

The DPDP Act Recognizes the Role of Data Processors

Data processors are recognized by the DPDP Act, which makes it clear that fiduciaries may engage, appoint or otherwise involve processors to process personal data on their behalf “only under a valid contract” (Section 8(2)). There are no prescribed rules for what a processing contract should entail. However, the DPDP Act places all obligations on data fiduciaries, which remain liable for complying with the law.

Data fiduciaries remain liable for overall compliance, regardless of any contractual arrangement to the contrary with data processors. The DPDP Bill requires data fiduciaries to mandate that a processor delete data when a data principal withdraws consent, and fiduciaries be able to share information of processors they have engaged when requested by a data subject.

1. The DPDP Act Has Broad Extraterritorial Effect and Almost No Restrictions for International Data Transfers

The DPDP Act applies to the processing of “digital personal data” within India. Importantly, the definition of the “data principal” does not include any condition related to residence or citizenship, meaning that it is conceivable fiduciaries based in India who process the personal data of foreigners within the territory of the country may be covered by the Act (outside of the “outsourcing exception” mentioned above).

The Act  also applies extraterritorially to processing of digital personal data outside India, if such processing is in connection with any activity related to offering of goods or services to data principals within India. The extraterritorial effect is similar in scope to the GDPR, and it may leave room for a broader interpretation through its inclusion of “any activity” connected to the offering of goods or services.

The DPDP Act does not currently restrict the transfer of personal data outside of India. It reverses the typical paradigm of international data transfer provisions in laws like the GDPR, by presuming that transfers may occur without restrictions, unless the Government specifically restricts transfers to certain countries (blacklisting) or enacts any other form of restriction (Section 16). No criteria for such restrictions have been mentioned in the law. This is a significant departure from previous instances of the Bill, which at one point contained data localization obligations (2018), and evolved at another point into “whitelisting” of countries (2022).

It should also be noted that other existing sectoral laws (e.g., those governing specific industries like banking and telecommunications) already contain restrictions on cross-border transfers of particular kinds of data. The DPDP Act clarifies that existing localization mandates will not be affected by the new law.

1. Consent Remains Primary Means for Lawful Processing of Personal Data Under the Act

Data fiduciaries are under an obligation to process personal data for a lawful purpose and only if they either obtain consent from the data principal for that purpose, or they identify a “legitimate use” consistent with Section 4. This process is conceptually similar to the approach proposed by the GDPR, requiring a lawful ground before personal data can be collected or otherwise processed. However, in contrast to the GDPR (which provides for six possible lawful grounds), the DPDP Act includes only two: strictly defined “consent” and “legitimate use.”

Which lawful ground is used for a processing operation is consequential. Based on the wording of the Act and in the absence of further specification, the obligations of fiduciaries to give notice and respond to access, correction and erasure requests (see Section 4 of this blog) are only applicable if the processing is based on consent and on voluntary sharing of personal data by the principal.

Valid Consent Has Strict Requirements, Is Withdrawable, And Can be Exercised Through Consent Managers

The DPDP Act requires that consent for processing of personal data be “free, specific, informed, unconditional and unambiguous with a clear affirmative action.” These conditions are similarly strict to those required under the GDPR, highlighting that the people whose personal data are processed must be free to give consent, and their consent must not be tied to other conditions.

In order to meet the “informed” criterion, the Act requires that notice be given to principals before or at the time that they are asked to give consent. The notice must include information about the personal data to be collected, the purpose for which it will be processed, the manner in which data principals may exercise their rights under the DPDP Act, and how to make a complaint to the Board. Data principals must be given the option to receive the information in English or a local language among the languages specified in the Constitution.

The DPDP Act addresses the issue of legacy data for which companies may have received consent prior to the enactment of the law. Fiduciaries should provide the same notice to these data principals as soon as “reasonably practicable.” In that case, however, the data processing may continue until the data principal withdraws consent.

Data fiduciaries may only process personal data for the specific purpose provided to the data principal and must obtain separate consent to process the data for a new purpose. In practice, this will make it difficult for data fiduciaries to rely on “bundled consent.” Provisions around “secondary uses” of personal data or “compatible purposes” are not addressed in the Act, making the purpose limitation requirements strict.

Data principals may also withdraw their consent at any time – and data fiduciaries must ensure that the process for withdrawing consent is as straightforward as that for giving consent. Once consent is withdrawn, personal data must be deleted unless a legal obligation to retain data applies. Additionally, data fiduciaries must ask any processors to cease processing any personal data for which consent has been withdrawn, in the absence of legal obligations imposing data retention.

The DPDP Act allows principals to give, manage, review and withdraw their consent through a “Consent Manager,” which will be registered with the Board and must provide an accessible, transparent, and interoperable platform. Consent Managers are part of India’s “Data Empowerment And Protection Architecture” policy, and similar structures have been already functional for some time, such as in the financial sector. Under the DPDP Act, Consent Managers will be accountable to data principals and act on their behalf as per prescribed rules. The Government will notify (in the Gazette) the conditions necessary for a company to register as a Consent Manager, which may include fulfilling minimum technical or financial criteria.

“Legitimate Uses” Are Narrowly Defined and Do Not Include Legitimate Interests or Contractual Necessity

As alternative to consent, all other lawful grounds for processing personal data have been amalgamated under the “legitimate uses” section, including some grounds of processing that previously appeared under a “reasonable purposes” category in previous iterations of the bill. It is notable that the list of “legitimate uses” in Section 7 of the Act does not include similar provisions to the grounds of “contractual necessity” and “legitimate interests” found in GDPR-style data protection laws, leaving limited options to private fiduciaries for grounding processing of personal data outside of consent, including for routine or necessary processing operations.

Among the defined “legitimate uses”, the most relevant ones for processing personal data outside of a government, emergency or public health context, are the “voluntary sharing” of personal data under Section 7(a) and the “employment purposes” use under Section 7(i).

The lawful ground most likely to raise interpretation questions is “voluntary sharing.” It allows a fiduciary to process personal data for a specified purpose for which a principal has voluntarily provided their personal data to the data fiduciary (presumably, provided it without the fiduciary seeking to obtain consent), and for which the principal has not indicated to the fiduciary an objection to the use of the personal data. For instance, one of the illustrations included in the law to explain Section 7(a) is the hypothetical of a buyer requesting a receipt of purchase at a store be sent to her phone number, permitting the store to use the number for that purpose. There is a possibility that subsequent rules may expand this “legitimate use” to cover instances of “contractual necessity” or “legitimate interests.”

A fiduciary may also process personal data without consent for purposes of employment or those related to safeguarding the employer from loss or liability, such as prevention of corporate espionage, maintenance of confidentiality of trade secrets, intellectual property, classified information or provision of any service to employees.

1. Data Principals Have a Limited Set of “Data Subject Rights,” But Also Obligations

The DPDP Act provides data principles a set of enumerated rights, which is limited compared to those offered under modern GDPR-style data protection laws. The DPDP guarantees a right of access and a right to erasure and correction, in addition to a right to receive notice before consent is sought (similar to the right to information in the GDPR). Thus, a right to data portability, a right to object to processing based on other grounds than consent, and the right not to be subject to solely automated decision-making are missing.

Instead, the DPDP Act provides for two other rights – a right to “grievance redressal,” which entails the right to have an easily accessible point of contact provided by the fiduciary to respond to complaints from the principal, and a right to “appoint a nominee,” which permits the data principal to nominate someone who can exercise rights on their behalf in the event of death or incapacity.

Notably, the rights of access, erasure and correction are limited to personal data processing based on consent or the “voluntary disclosure,” legitimate use, which means that whenever government bodies or other fiduciaries rely on any of the “legitimate uses” grounds they will not need to reply to access or erasure/correction requests, unless further rules adopted by the government specify otherwise.

In addition, the right of access is quite limited in scope. It only gives data principals the right to request and obtain a summary of the personal data being processed and of the relevant processing activities (as opposed to obtaining a copy of the personal data), and the identities of all fiduciaries and processors with whom the personal data has been shared by the fiduciary, along with a summary of the data being shared. However, Section 11 of the law leaves space for subsequent rules that may specify additional information to be given access to.

Data principals have the right to request erasure of personal data pursuant to Section 12(3), but it is important to highlight that erasure may also be required automatically – after the withdrawal of consent or when the specified purpose is no longer being served (Section 8(7)(a)). Similarly, correction, completion and updating of personal data can be requested by the principal, but must also occur automatically when the personal data is “likely to be used to make a decision that affects” the principal (Section 8(3)).

Data Principals May Be Fined if They Do Not Comply With Their Obligations

Unlike the majority of international data protection laws, Section 15 of the DPDP Act imposes duties on data principals, similar to Article 10 of Vietnam’s recently adopted Personal Data Protection Decree (titled “Obligations of data subjects”).

These obligations include, among others, a duty not to impersonate someone else while providing personal data for a specified purpose, not suppress any material information while providing personal data for any document issued by the Government, and, significantly, not register a false or frivolous grievance or complaint. Noncompliance may result in a fine (see clause 5 of the Schedule). This may hamper the submission of complaints with the Board, per expert analysis.

1. Fiduciaries are Bound by a Principle of Accountability and Have Data Breach Notification Obligations

The DPDP Act does not articulate Principles of Processing, or Fair Information Practice Principles, but the content of several of its provisions put emphasis on purpose limitation (as explained in previous sections of the blog) and on the principle of accountability.

Section 8 of the Act includes multiple obligations for data fiduciaries, all under an umbrella expectation in paragraph 1 that they are “responsible for complying” with the provisions of the Act and any subsequent implementation rules, both regarding processing undertaken by the data fiduciary and by any processor on its behalf. This specification echoes the GDPR accountability principle. In addition, data fiduciaries are under an obligation to implement appropriate technical and organizational measures to ensure the effective implementation of the law.

Data security is of particular importance, considering that data fiduciaries must both take reasonable security safeguards to prevent personal data breaches, and notify the Board and each affected party if such breaches occur. The details related to modalities and timeline of notification will be specified in subsequent implementation rules.

A final obligation of data fiduciaries to highlight is the requirement they establish  a “readily available” mechanism for redressing “grievances” by data principals in a timely manner. The “grievance redress” mechanism is of utmost importance, considering that data principals cannot address the Board with a complaint until they “exhaust the opportunity of redressing” the grievance through this mechanism (Section 13(3)). The Act leaves determination of the time period for responding to grievances to delegated legislation, and it is possible that there may be different time periods for different categories of companies.

1. Fiduciaries Have a Mandate to Verify Parental Consent for Processing Personal Data of Minors under 18

The DPDP Act creates significant obligations concerning the processing of children’s personal data, with “children” defined as minors under 18 years of age, without any distinguishing sub-category for older children or teenagers. As a matter of principle, data fiduciaries are forbidden to engage in any processing of children’s data that is “likely to cause any detrimental effect on the well-being of the child.”

Data fiduciaries are under an obligation to obtain verifiable parental consent before processing the personal data of any child. Similarly, consent must be obtained from a lawful guardian before processing the data of a person with disability. This obligation, which is increasingly common to privacy and data protection laws around the world, may create many challenges in practice. A good resource for untangling its complexity and applicability is FPF’s recently published report and accompanying infographic – “The State of Play: Is Verifiable Parental Consent Fit For Purpose?”

Finally, the Act also includes a prohibition on data fiduciaries engaging in tracking or behavioral monitoring of children, or targeted advertising directed at children. Similar to many other provisions of the Act, the government may issue exemptions from these obligations for specific classes of fiduciaries, or may even lower the age of digital consent for children when their personal data is processed by designated data fiduciaries.

1. The Act Creates a Data Protection Board to Enforce the Law, But Reserves Regulatory Powers For the Government

The DPDP Act empowers the Government to establish the Board as an independent agency that will be responsible for enforcing the new law. The Board will be led by a Chairperson and will have Members appointed by the Government for a renewable two-year mandate.

The Board is vested with the power to receive and investigate complaints from data principals, but only after the principal has exhausted the internal grievance redress mechanism set up by the relevant data fiduciaries. The Board can issue binding orders against those who breach the law, can direct urgent measures to remediate or mitigate a data breach, imposing financial penalties and direct parties to mediation.

While the Board is granted “the same powers as are vested in a civil court” – including summoning any person, receiving evidence, and inspecting any documents (Section 28(7)), the Act specifically excludes any access to civil courts in the application of its provisions (Section 39), creating a de facto limitation on effective judicial remedy similar to the relief provided in Article 82 GDPR. The Act grants any person affected by a decision of the Board the right to pursue an appeal in front of an Appellate Tribunal, which is designated the Telecom Disputes Settlement and Appellate Tribunal established under other Indian law.

Penalties for breaches of the law have been stipulated in a Schedule attached to DPDP Act and range from the equivalent in rupees of USD $120 to USD $30.2 million. The Board can determine the penalty amount from a preset range based on the offense.

However, the Board does not have the power to pass regulations to further specify details related to the implementation of the Act. The Government is conferred broad discretion in adopting delegated legislation to further specify the provisions of the Act, including clarifying modalities and timelines for fiduciaries to respond to requests from data principals, the requirements of valid notice for obtaining a data principal’s consent for processing of data, details related to data breach notifications, and more. The list of operational details that may be specified by the Government in subsequent rules is open-ended and detailed in Section 40(2)(a) to (z). Subsection (z) of this provision provides a catch-all permitting the Central Government to prescribe rules on “any other matter” related to the implementation of the Act.

In practice, it is expected that it will take time for the new Board to be established and for rules to be issued in key areas for compliance.

Besides rulemaking power, the Central Government has another significant role in the application of the law. Pursuant to Section 36, it can require any information (including presumably personal data) that it wants (or “call for”) from the Board, data fiduciaries, and “intermediaries” as defined by the IT Act. No further specifications are made in relation to such requests, other than that they must be made “for the purposes of the Act.” This provision is broader and subject to fewer restrictions than provisions on data access requests in the existing IT Act and its subsidiary rules.

Additionally, the Central Government may also order or direct any governmental agency and any “intermediary” to block information for access by the public “in the interests of the general public.” To issue such an order, the Board will need to have sanctioned the data fiduciary concerned at least twice in the past, and the Board must advise the Central Government to issue such an order. An order blocking public access may refer to “any computer resource” that enables data fiduciaries to offer goods or services to data principals within the territory of India. While it is now common among modern comprehensive data protection laws around the world for independent supervisory authorities to order erasure of personal data unlawfully processed, or to order international data transfers or sharing of personal data to cease if conditions of the law are not met, these provisions of the DPDP Act are atypical because the orders will come directly from the Government, and also because they more closely resemble online platform regulation than privacy law.

1. Exceptions for Publicly Available Data And Processing for Research Purposes Are Notable for Training AI

Given that this law comes in the midst of a global conversation about how to regulate artificial intelligence and automated decision-making, it is critical to highlight provisions in the law that seem directed at facilitating development of AI trained on personal data. Specifically, the Act excludes from its application most publicly available personal data, as long as it was made publicly available by the data principal – for example, a blogger or a social media user publishing their personal data directly – or by someone else under a legal obligation to publish the data, such as personal data of company shareholders that regulated companies must publicly disclose by law.

Additionally, the Act exempts the processing of personal data necessary for research or statistical purposes (Section 17(2)(b)). This exemption is extremely broad, with only one limitation in the core text: the Act will still apply to research and statistical processing if the processing activity is used to make “any decision specific to the data principal.”

There is only one other instance in the DPDP Act where processing data to “make decisions” about a data principal is raised. Data fiduciaries are under an obligation to ensure the “completeness, accuracy and consistency” of personal data if it is used to make a decision that affects the data subject. In other words, while the Act does not provide for a GDPR-style right not to be subject to automated decision-making, it does require that when personal data are used for making any individual decisions, presumably including automated or algorithmic decisions, such data must be kept accurate, consistent and complete.

Additionally, the DPDP Act remains applicable to any processing of personal data through AI systems, if the other conditions of the law are met, given the broad definitions of “processing” and of “personal data.” Further rules adopted by the Central Government or other notifications may provide more guidance in this regard.

Notably, the Act does not exempt processing of personal data for journalistic purposes, a fact criticized by the Editors’ Guild of India. In previous versions of the Bill, especially the expert version spearheaded by Justice Srikrishna in 2017, this exemption was present. It is still possible that the Central Government will address this issue through delegated legislation.

Key Takeaways and Further Clarification

India’s data protection Act has been in the works for a significant period of time and the passage of the law is a welcome step forward after the recognition of privacy as a fundamental right in India by the Supreme Court in its landmark Puttaswamy judgment.

While the basic structure of the law is similar to many other global laws like the GDPR and its contemporaries, India’s approach has its differences, such as more limited grounds of processing, wide exemptions for government actors, regulatory powers for the government to further specify the law and to exempt specific fiduciaries or classes of fiduciaries from key obligations, no baked-in definition or heightened protection for special categories of data, and the rather unusual inclusion of powers for the Government to request access to information from fiduciaries, the Board and “intermediaries”, as well as to block access by the public to specific information in “computer resources”.

Finally, we note that many details of the Act are still left to be clarified once the new Data Protection Board of India is set up and further rules for the specification of the law are drafted and officially notified.