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Rahul was the head of the research division of R&Y Ltd., a pharmaceutical company which is working on development of a drug which cures mouth cancer. While working at the company, Rahul got an exciting offer from Surya Pharma, a competitor, asking him to head the research team there. He left his job R&Y Drugs for Surya Pharma. After 6 months, Surya Pharma launched a new drug which claims to cure mouth cancer, which got the senior management at R&Y Drugs extremely suspicious. They started suspecting wondering if Rahul has sent out confidential information to competitors, which would be in breach of his employment contract. 

After an internal investigation, it was found out that some of the colleagues have seen Rahul copying certain documents on to his personal laptop and the IT department stated revealed that Rahul has sent some encrypted documents from his official email id  to his personal id. R&Y filed a suit against Rahul for breaching confidentiality obligations under his employment contract. 

For the determination of this case, however, it is extremely important for the legal advisors of R & Y to determine the contents of the encrypted emails and documents on Rahul’s laptop, and also to examine his inbox and find out to whom these emails had been sent (in case they were electronically forwarded). This information needs to be discovered and presented in court as evidence, if the case is to proceed further.

In a legal proceeding, it is important to establish the facts before a court. Typically, to establish the facts, parties may retain physical records of transactions, or present witnesses who have observed or participated in the occurrence of certain incidents to give evidence before a court.
With the growth of internet and spread of computer in our life, most of the commercial transactions, data and messages are transferred through electronic channels such as emails, instant messaging services, SMS, CDs, USB drives. A large portion of communication is now exchanged over the ‘cloud’, as cloud computing has become popular. With so much digital data being exchanged over different kinds of media and servers, the evidence with respect to any dispute is likely to be scattered – what happens when activities and evidence of transactions moves online? How can necessary evidence be extracted for legal proceedings? How does one go about collecting electronic evidence?

Electronic evidence is acceptable under Indian law – the rules for its admissibility are dealt with separately under the chapter on electronic evidence. However, production and admissibility of electronic evidence is quite different from collection of evidence.

This chapter is about collection of electronic evidence, either through steps taken by the parties themselves or through court-intermediated processes, called ‘e-discovery’.

The materials gathered through the e-discovery process are used to establish the facts and the argument of a party to the legal proceeding. Such evidence-gathering and ‘discovery’ orders are extremely vital in enabling a party to uncover evidence which can be used to establish its stance before a legal forum.

E-discovery refers to exchange of “electronically stored information” (ESI), that is, all information or documents stored in an electronic format by an organisation with the opposite party in an organisation.

Conceptually, fact or information-finding exercises are typically carried out through discovery orders, summons, search-warrants, interrogatories (where written questionnaires are served to the other party), and inspection. The same processes can be carried out in case of ESI but the entire process needs to be separately discussed because:
  • The volume of information to be extracted may be huge, it may be scattered over several locations and the extraction process can be extremely technical
  • In some jurisdictions (such as the US), rules for electronic discovery are different

E-discovery in United States is governed either by amendments made to the Federal Rules of Civil Procedure, which came into force from 1 December 2006 or under the rules made by the concerned states. In some situations rules made by local courts apply.

Indian law on e-discovery and why lawyers should know about it

E-discovery is an evolving field that goes far beyond mere technology. Although it may appear to be managerial and process-oriented and require collaborative effort with the IT team, it gives rise to complex legal, constitutional, political, security and personal privacy issues. However, e-discovery orders in India are still very rare – however, the process for discovery of ordinary documents, which will be applicable to electronic documents as well, is explained below.

Civil cases

The Information Technology Act, 2000 has amended various provisions in the Evidence Act, 1872 to accommodate acceptance of electronic information and documents in digital format in the courts as evidence (as discussed in a separate chapter). Provisions for discovery of ordinary documents and information are applicable for discovery of electronic evidence as well – there are no specific rules applying particularly for discovery of electronic evidence.

The court can issue summons to a party for discovery of a document, either upon the application of one of the parties, or on its own, in case a party has relied on a document in the pleadings. Courts have the discretion to refuse the request for a discovery order, or limit it to discovery of a particular class of documents, if it is not necessary for fair disposal of the suit or if it puts unnecessary financial burden on the other party. Similarly, a party can also object claiming that the discovery request is premature, as it will become relevant only after determination of certain issues.

Discovery is typically ordered on oath - the party submitting the document must provide an affidavit along with the documents.

A format for the oath is provided in Annexure C, Form 5, accessible here.  

As a general rule, failure to produce the document prevents the party from relying on it in future.

In case the document relevant to the plaintiff is sought from him or her, but the plaintiff fails to produce the document, the suit may even be dismissed for want of prosecution, depending upon how integral the document is to the plaintiff’s claim.

In case the document is sought from the defendant and the defendant fails to produce it, then the portion of his defence which seeks to rely on the document will be struck out.

What happens when the plaintiff seeks a document that is in the possession of the defendant?

Typically, courts insist on primary evidence. If it is unavailable, copies of the information may be sought – these typically count as secondary evidence. If the defendant does not produce the original ESI, the plaintiff will be able to rely on any secondary evidence that it has of the same.
In case a witness to whom a discovery order is issued fails to produce the document, the court has the power to issue a warrant for the arrest of the person (with or without bail) and place him in civil prison, attach his property or impose a fine. A search warrant may be issued along with a private investigator appointed by the parties, who can accompany a court official to carry out the search. However, the search-warrant must specifically mention the location of search and cannot generally authorize the investigator to search in any location.

(see Order 11 of the Civil Procedure Code or CPC for provisions related to discovery from a party and Order 16, CPC for discovery from a witness.)

Consequences of non-production of documents – an illustration

It is important for a party to comply with the discovery order of the court. In case a document which has been referred to in legal proceedings between X and Y is within the possession of X, and X does not produce it before the court, the court may draw an adverse inference with respect to the issue. For example, consider that X sues Y for misrepresentation with respect to a cloud computing contract. Y defends saying that X had accepted a particular statement of Y and circulated an internal note electronically within its own team. X does not deny that it had not sent this internal note, and it fails to produce this memorandum. An adverse inference can be drawn – the court may presume that an internal memorandum to that effect had been sent by X internally.

Consequences of breach of an e-discovery order

If the delivering party has intentionally failed to produce the document, the court may issue a search-warrant, a warrant for arrest (with or without bail) or an order for the attachment of the property or impose a fine of up to INR 5000. Non-production of electronic documents or destruction of electronic records is punishable under the Indian Penal Code – the punishment could even extend to imprisonment, as below:

Destruction of electronic records which may be produced as evidence before a Court or public servant Section 204 Imprisonment for 2 years, or fine, or both.
Intentionally does not produce an electronic document which that person is legally bound to produce before a public servant or a Court Section 175 Simple imprisonment for 1 month, or fine of INR 500, or both.
A civil court also has powers to order inspection of the document, or require relevant representatives of the other side to be examined on ‘interrogatories’, which are similar to written questionnaires.

Cases involving issues under IT Act

However, civil courts do not have jurisdiction to entertain matters pertaining to civil remedies that are specifically provided for under the IT Act (see section 61 of the Information Technology Act, 2000). These matters typically relate to:
  • unauthorized access to data on digital networks
  • introduction of viruses on to a digital system or network
  • damage to any computerized system
  • damage or disruption in the accessibility to a computer network
  • identity and data theft
  • failure to protect data
(for more details, refer Sections 43, 43-A and 44 of the IT Act)

In such cases, the power to issue discovery orders lies with the Adjudicating Officer under the IT Act(adjudicating officers are appointed by the Central Government.

Several litigators have stated that proceedings before adjudicating offers can be fairly protracted, and that utilizing ordinary civil court remedies may be preferable where possible.

Since the IT Act bars the jurisdiction of civil courts with respect to civil cases, parties need to frame their dispute in a different manner – for example, they could consider basing their claim on unauthorized access around a common law right such as trespass. Similarly, it is possible to rephrase data theft related claims around infringement of intellectual property rights in appropriate cases.

Discovery provisions under criminal law

The police has wide powers of conducting search and seizing necessary documents for the purposes of investigation into an offence. The officer-in-charge of the police station can issue a written order, or the Magistrate may issue summons to a person to produce a document for the purpose of investigation. This corresponds to an order for discovery in civil cases. The Magistrate may even issue a search-warrant authorizing the police to conduct a search in the premises of the concerned person, in case he is of the opinion that the party may not produce the document upon issue of summons.

(See Sections 91 to 104 of the Code of Criminal Procedure, 1973 – these will be applicable even in case of offences under the Information Technology Act)

E-discovery orders related to regulatory matters

Different kinds of regulatory violations, such as financial, banking, securities fraud or competition law investigations may be conducted – in these cases the investigation is typically conducted by the regulator itself. Typically, the regulators have the same powers for undertaking investigations as civil courts – for example, SEBI and Competition Act specifically grant SEBI and the Competition Commission respectively the same powers as that of a civil court for the purpose of production and discovery of documents. However, specific reference will have to be made to the parent act under which the regulatory body has been created.

For more details, refer to:
  • Section 11 of SEBI Act
  • Section 36 of Competition Act
  • Parent acts of other sectoral regulators
Defences and responses to an e-discovery order

Valid responses to an e-discovery order from a court include:
  • Arguing that the request is premature and contingent on determination of other issues in the suit.
  • That the content of the information is privileged and cannot be disclosed.
  • The ESI is not in possession of the party (this will have to be given on affidavit) - this must be a genuine statement.
  • If the request for data is too voluminous or requires data in a format that is too expensive, soft copies may be provided for the other side to print, or a cost-sharing arrangement can be arrived at. Courts may be involved in the process as well.
Exceptions to e-discovery orders – which documents need not be produced?

Privileged communications are exempted from disclosure in the e-discovery process because these communications cannot be accepted as evidence in a legal proceeding. For example, consider a situation where electronic communication between an attorney and client may be called into question while determining an issue in a legal proceeding. Note that in most jurisdictions (including India), the law treats attorney-client communications as privileged, that is, they cannot be disclosed to the court.

However, it is not fully clear whether the same privilege will be extended to a communication between the company and its in-house lawyer, considering that he may merely be considered as an employee of the company (the company is his employer and not his client) who has legal qualifications, but not a legal practitioner.

Under evidence law, apart from communication between an attorney and client, the following communications are considered privileged:
  • Communications between husband and wife
  • Information in unpublished official records (subject to Right to Information)
  • Information pertaining to how a judge, police officer or a revenue officer received information as to commission of an offence
  • Communications in official confidence
(refer to Sections 121 – 131 of Evidence Act for more details)

Note that in some cases, privileged communication can be disclosed, in case there is a waiver by the concerned party whose interest is sought to be protected.
Key challenges in e-discovery matters

E-discovery is a niche area – several disputes involve physical evidence and hence lawyers do not often have necessary technical skillsets pertaining to e-discovery. The challenge in any e-discovery request is to know what information needs to be given. E-discovery matters can be quite complex and even experienced law firm practitioners or litigators may not have the requisite technical expertise to deal with them – hence, they may require lawyers to acquire necessary skillsets or engage e-discovery experts.

In certain jurisdictions (such as certain states in the US), lawyers have a professional responsibility to stay updated with technological developments.

Clients and lawyers cannot afford suppress material evidence – this is punishable under law. At the same time, certain communications (such as those between a lawyer and a client) qualify as privileged communications under the law and are protected from disclosure by the attorney to a legal proceeding. Accidental disclosure of these documents could therefore amount to a violation of an attorney’s statutory duty towards clients.

Accidental disclosure, clawback and quickpeek agreement

Although certain types of information (such as privileged information) need not be provided in an e-discovery proceeding, risk of accidental disclosure of such information is not ruled out. At a practical level, such information is often handed over, at least in some measure. What can be done if the information is accidentally disclosed?

Parties enter into clawback agreements which provide that accidental disclosures of privileged information will be ‘clawed back’ or considered to be withdrawn, and will not be used in the legal proceedings. If there is a clawback agreement, a party cannot in the event of accidental disclosure of privileged information, argue that the other side has waived its right to claim privilege by disclosing the information.

In a quickpeek agreement a party allows the other side to conduct an initial examination of all documents (without segregating privileged documents), to enable the other side to arrive at a list of documents. After the list is prepared, the party is free to claim exemption from disclosure of any privileged information. In this case as well, if any documents containing privileged information were seen in the ‘initial examination’ by the other side, it does not count as a waiver of the privilege.

E-discovery requirements, data retention and preservation strategies

This is an interesting question – let’s understand when and why data should be preserved:
  • In certain cases, where a party wants to rely on electronic information to establish its own case, it will be in the party’s own strategic interest to preserve data.  
In this regard, as a strategy an organisation should not wait for a court summons to put a “legal hold” on the documents. It should preserve key documents as a strategy, and at least when there is an apprehension of either getting involved in an imminent lawsuit. Indicators of a possible lawsuit may include:
  1. A demand notice, where the sender demands that the recipient comply with the terms of an agreement, stating that there has been a breach.
  2. A cease and desist notice send by a client, customer, employer or any other third party – these are often sent with respect to intellectual property infringements
  3. Disputed termination or layoffs and other employment disputes, including cases of sexual or other forms of harassment
  4. Media reports revealing certain irregularities within the organisation
  5. Mass defective product complaints – these can have a possibility of consumer proceedings or class action suits (class action suits are extremely common in the US)
In this regard, it may be strategically important to store all relevant information as a general policy, irrespective of any legal requirements to store data. Further, having suitable backups may be a prudent strategy, as digital evidence can easily be deleted, modified or get corrupted – a backup helps in ensuring that there is no economic loss caused due to accidental destruction of evidence. A lawyer or a consultant’s help may be needed while formulating a data retention strategy.
  • In situations where important information pertaining to the complainant is in the possession of the defendant, the defendant has a strategic reason not to furnish the information – however, the defendant must be careful about this as it may amount to suppression of material information.
  • In other cases, legal rules may impose obligations for preservation of data for a particular time period, or making it available at least on a real-time basis. For example, the Information Technology (Intermediaries Guidelines) Rules, 2011 state that when information that is in violation of the rules has been taken down from the network, records of the information nevertheless need to be preserved for at least 90 days for the purposes of investigation.
Similarly, terms and conditions of operation of telecom companies (mentioned under the Unified Access Services License (UASL)) and internet service providers (governed by the ISP license) entered into with the Government of India prescribes the kind of data (including electronically stored information) and the duration for which such data should be preserved, such as commercial records of communications exchanged on the network, which must be preserved for at least 1 year. Other details such as copies of log of users, diagram of the network of the service provider, location of any customer, etc. must be made available on request on a real-time basis. The full list of items can either be accessed from the UASL or here on the website of the Centre of Internet and Society.
(For reference purposes, the UASL is accessible here.)

Managerial and strategic pointers for organisations

Destruction of electronic evidence is punishable under law, as explained above. Management of information in a large organization is complex and needs to be controlled - hence, organizations may consider implementing certain pointers in their managerial processes and in their company policies. 
  • It is advisable for organisations to take all reasonable steps to prevent loss of data. Written messages must be sent to all those possible custodians of data to suspend record management policies which might delete relevant data. Data preservation is crucial in litigation as Court might draw adverse inference or award penalty for non-preservation or destruction of evidence.
  • An organisation must have efficient data retention policies, implement data archival and records management systems. It is also important to make the employees aware about the importance of email and data archiving. As most of the data is created and held in the systems of the employees, it is important to make the employees aware how non-retention of data might affect the organisation.
  • Identifying the right resources will help in saving cost and time during the e-discovery phase - involve the right personnel in the collection phase, including members from IT & legal teams to create an efficient data map to identify the potential source of the information sought.
US rules on e-discovery - why is it essential to understand the e-discovery process?

E-discovery processes are fairly sophisticated in the US, and you may be interested in learning about them in some detail in this discussion as well. Why is it important to know about e-discovery (especially the US framework)?
  • Understanding of rules and processes governing e-discovery are important for those who want to consider jobs in Legal Process Outsourcing industry (the LPO sector employs the most number of lawyers) as a lucrative career option. E-discovery is a time consuming and expensive process - in order to save cost and adhere to shorter deadlines, many law firms and in-house legal teams from USA outsource tasks to Indian LPOs which provide e-discovery related services for their clients. 
  • Since most internet companies have some connection with the US (they may be registered there or have servers located there), it is a good idea to understand US rules for e-discovery, in case disputes arise in future. This is a great way for lawyers wanting to work as in-house counsels, in law firms or as solo practitioners to develop their skillsets.
  • Internet and cloud-based services are becoming popular very fast in India. Many Indian startups are offering such services. Hence, the Indian environment is likely to witness more sophistication in future. In many situations US laws may become relevant, since many of these Indian startups may be using third-party service providers, who are most likely to have US presence. For example, various education and technology companies in India use Amazon Web Services to stream video.
  • Understanding of e-discovery rules and procedures is important for those who advise or consult companies which have a multinational presence. For example, a US court may issue a request to retrieve information which is stored in the Indian office of a US entity (it can also be a back office or a fully owned subsidiary). In such cases, an Indian lawyer may be engaged to help the company with necessary legal compliance and formalities (or to defend against the request for disclosure) – hence, understanding of the process involved would help the Indian lawyers to get an edge.
Summary of e-discovery related rules in US under Federal Civil Code Procedure

In the United States, the Federal Rules of Civil Procedure govern e-discovery related processes, and are summarized below:
  • The rules insist for a ‘pre-trial’ conference (the pre-trial stage begins after a complaint is filed by a party) between the parties to determine on the scope of discovery of the ESI, form of production, data preservation and privileged waiver (whether the confidential communication between the advocate and client can be revealed). 
  • In case certain information is “not reasonably accessible”, the financial burden may be shared with the other party.
  • The requesting party may request the court to issue an order to disclose such information on showing sufficient grounds for granting the same. The court may put conditions on such discovery, including shifting the burden of costs of such discovery on the requesting party.
  • Courts have power to sanction a party for failure to obey discovery orders – these can range from minor fines to drawing adverse inferences against the party.
  • The rules permit non-disclosure of certain privileged documents, for example the communication between the company and attorney, including in-house counsel.
In case of disclosure of such privileged documents, the other party can request for return of such documents or immediate deletion or destroy or such information (popularly known as clawback or quickpeek arrangements, see above).

What are the phases in an e-discovery process?

(important for lawyers to effectively participate in the e-discovery process)

E-discovery is a complex process – in the event of a discovery request, there may be a huge volume of information that may need to be sifted to identify relevant information. If the organisation is large, the information can be scattered in multiple locations and in different storage mediums.

Therefore, once an organisation receives a request for e-discovery, it should plan a process by which the relevant information will be identified, reviewed and then handed over to the other party. This process is largely managerial in nature, but a lawyers’ participation is extremely crucial, in collaboration with the IT team. Hence, understanding the steps involved in this process becomes extremely important from a lawyer’s perspective.

Technological tools may also be used extensively - companies such as Xerox, Canon and the Big Four such as Price WaterHouse Coopers are providing significant consultancy and technology-related services around the e-discovery process.

In order to make an effective data discovery process and to give the organisation control over the process, the e-discovery process can be conceptually understood as comprising of multiple phases (there is no formal or technical classification), known as an “electronic discovery reference model” (EDRM). EDRM is used to manage ESI through the handover of information. A typical EDRM process should include the following steps:
  • Identification – In the first phase, the potential sources and persons who are responsible for creation or storage of such information are identified. Personnel form IT team and legal team of the delivering party should be involved to have a data-map, to identify sources and the custodians of such data. Typical questions that need to be answered at this stage are: 
What types of devices may contain ESI?
What kinds of files are being sought?
Who are the main data custodians?
These questions need to be answered jointly with the IT and the legal team.
  • Preservation –This is a crucial phase, where the data is put on “legal hold”, wherein steps are taken to avoid data deletion to avoid sanctions for data spoilation. Generally the legal counsel of the delivering party will send a letter to the organisation to put a “legal hold” of the organisation. (See the annexure of sample preservation letter.)
  • Collection – In this stage, the ESI and associated metadata (information like date and time of creation, author, computer used to create the file, etc.) need to be collected, keeping in view that it will meet the requirements of the Court. Data may be collected by the employees themselves or through an external service provider.
  • Processing - In this stage the data and information are extracted and put in special review software for further analysis and review. The typical processes in this stage involve application of various data extraction methods to extract data and metadata from the files and conversion of the files into the machine reviewable format. This process is generally handled by external litigation support experts. It is important to ensure that the content inside the information is not modified or lost in the ‘processing’ stage.
  • Review – As explained above, certain categories of information are protected from disclosure. Before handing over ESI to the other side, a re-check of information protected from disclosure needs to be undertaken, so that confidential, privileged or legally protected information is not accidentally disclosed (note that certain confidential information may have to be disclosed to courts in a legal proceeding, but this does not extend to privileged communications, such as interactions protected by the attorney-client privilege.
How is privileged information identified? Privileged information is typically identified with the help of sophisticated software which applies various data mining processes including keyword search, assigning date range, concept based searching, hash function algorithm and linguistic pattern recognition.
  • Production and Presentation - Once the relevant data has been identified, the data need to be produced in an agreed manner, which may be in the native or original format (like Word or Excel) or a “reasonably usable format” (TIFF or PDF). In certain cases the metadata (background data like date and time of creation, author, etc.) of such documents may need to be submitted as well. The produced data need to be then presented before the court. In certain cases, the court may insist for production of the information in the original format. The legal team, in such cases must present the exhibits, documents in the assigned format. Note that the format in which data is presented can have significant cost implications.
Annex – Categories of ESI and their relevance

Electronically stored information (ESI) can include emails, web pages, databases, word processing files which are stored in a magnetic tape, hard discs, CD, USB drives, and even on cloud storage systems. However in comparison with paper based documents, ESI can be in huge volumes considering the fact that the same information can be stored in multiple places, for example in hard disks of multiple reviewers and also on the intranet of the organisation. Electronically stored information has been divided into five types depending upon the cost and effort involved in procuring the information: (Zubulake v UBS Warburg)
  • Active online data – Data which is created, received or processed on a regular basis. The information can be accessed very easily, for example the information stored on magnetic tapes, hard disks or active network servers
  • Near-line data - Data stored on robotic storage devices that consist of external storage devices like CDs or slower magnetic tapes and USB drives. The accessibility of the data may be bit slower than active online data, but can be accessed quite easily.
  • Offline archives/storage data – Data stored on archival external devices such as on CDs or magnetic tapes. Retrieval of this type of information requires manual intervention and may take considerable amount of time, depending on the archiving facility arrangement.
  • Backup tapes – Data which is stored on backup tapes, mostly to facilitate data retrieval during disaster. Most of these data is in compressed format and may not be designed for retrieval of specific files or documents.
  • Erased, overwritten and corrupted data – This type of data might be difficult to retrieve.
US courts have ruled that out of the above five categories of data, the last two categories, ie, information stored on backup tapes and erased, overwritten and corrupted data are difficult to retrieve and in some cases inaccessible. Courts may shift economic burdens for retrieval of such information on the party seeking the information.

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