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Dec 34 min read

How Does The Law Handle Fraud In Online Transactions And E-Commerce?

There Has Been A Rapid Increase In The Access Of Ecommerce As Well As Digital Transactions In India, Thus Changing Access To The Consumer-Market-Business Interaction. Though The Facilities Available With Online Access Are Convenient And Efficient, They Have Also Exposed The Current Consumer Market To Different Kinds Of Fraud. Online Fraud Ranges From Phishing Scams To Unauthorized Transactions And Very Clearly Presents A Challenge For Consumers, Businesses, And The Legal Scenario.

Online Fraud In E-Commerce


Online Fraud Encompasses Various Acts Of Deception Intended For Financial Or Personal Advantage. Common Types Of E-Commerce Online Frauds Are:


  • Phishing And Identity Theft: A Form Of Unauthorized Acquisition In Which Criminals Impersonate Certain Legit Entities And Steal Sensitive Information Such As Passwords, Credit Card Numbers, And Bank Details.

  • Payment Fraud: Unauthorized Or Fraudulent Transactions Made With The Use Of Credit Cards, Debit Cards, Or Other Online Payment Means.

  • False Advertising: Advertisements That Misrepresent Products Or Services And, Thus, Deceive Consumers.

  • Counterfeiting Of Products: Selling False Or Inferior Goods Masquerading As Branded.

  • Delivery Fraud: Such Empty Promises Regarding A Delivery Not Really Taking Place Are For The Cause Of Services Non-Rendered Toward That Consumer. These Have Been Provided Preferably With The Consumer's Paying Upfront.

  • Refund And Chargeback Scams: Most Scammers Tweak The Refund Process To State That The Refund Or Chargeback Request Was Valid When Indeed It Was Not.


Handling Fraud In Online Transactions And E-Commerce: Legal Frameworks


The Indian Legal System Has Evolved To Meet The Challenges Posed By Online Fraud. The Following Laws And Regulations Are Essential In The Battle Against Fraudulent Activities In E-Commerce:


Information Technology Act Of 2000 (It Act)


As Such, The Act Is The Main Legislation Regulating Online Transactions And Cybercrimes. Some Of The Major Provisions Include:


  • Section 43a: It Provides For Compensation And Liability For Failure To Protect Any Sensitive Personal Data To A Person Or An Entity Managing Consumer Data.

  • Section 66c: Deals With Identity Theft Prescribing Punishments For The Use Of Someone's Digital Signature, Password, Or Unique Identification Features.

  • Section 66d: It Is Punishable By Imprisonment For Three Years And Fine For Cheating By Personation Through Electronic Communication.

  • Section 72: It Criminalizes Unauthorized Access Of Personal Information Coupled With Breaches Of Confidentiality.


Bhartiya Nyaya Sanhita (2023)


Specific Clauses Of The Bns Are Utilized For E-Commerce Frauds:


  • Section 318 Of Bns: Addresses Cheating And Dishonestly Inducing Delivery Of Property Making The Penal Term For Such An Offense Up To Seven Years.

  • Section 336 (2) Of Bns: Allows Punishment For Forgery, Including Falsification Of Records Via Electronic Means.

  • Sections 336 (3) And 340 (2) Of Bns: Deal With Forgery To Commit Cheating And With Use Of Forged Documents As Genuine.


Consumer Protection Act (2019)


The Consumer Protection Act Confers Rights And Lays Down Remedies For Consumers Against Unfair Trade Practices And Fraudulent Acts In E-Commerce.


  • E-Commerce Rules, 2020: These Rules Introduced By This Act Require All Online Platforms To Be Transparent In Pricing, Return Policies, And Grievance Redressal Mechanisms.

  • Consumer Protection (Mediation And Redressal): The Act Affords A Simple Even Framework For Consumers To Source Compensation In Cases Of Fraud Or Deception.


Reserve Bank Of India (Rbi) Guidelines


The Reserve Bank Of India Regulates The Payment Systems And Takes Contrivances To Avoid Fraud In Payments: 


  • Ombudsman Scheme For Digital Transactions: This Scheme Has A Provision For The Complaints From Customers When Transactions Are Unauthorized Or Where Banks And Non-Banking Financial Institutions Are Deficient In Some Or Any Transaction-Related Service. 

  • Payment Security Circulars: These Are Basically Circulars Each Of Which Describes Measures On Two Factors As Well As Transactional Alerts For Securing Safety Against Fraud.


Mechanisms For The Enforcement


  • Cyber Crime Cells: All Across India, The Special Cybercrime Cells Look After The Complaints Regarding Online Fraud. The Victims Can Complain Either Online Or Physically.

  • Indian Computer Emergency Response Team (Cert-In): Cert-In Has Been Mandated To Observe And React To Incidents Under Cyber Security, This Also Includes Incidents With Respect To E-Commerce Fraud.

  • Consumer Courts: District, State And National Consumer Forums Hear Matters Related To Frauds In E-Commerce Transactions. 

  • Banking Ombudsman: The Ombudsman Scheme Provides A Mechanism For The Resolution Of Grievances With Respect To Unauthorized Banking Transactions Or Deficiencies In The Payment System.

  • Police And Judiciary System: Law Enforcement And Courts Have A Major Role In The Investigation And Prosecution Of Fraudsters, According To The Relevant Law.


Preventive Measures


The Action Measures Given Below Could Help Mitigate The Chances Of Online Fraud In E-Commerce:


  • Consumer Awareness: Campaigns Against Safe Online Practices, Which Include Checking The Credentials Of Sellers And Avoiding Suspicious Links, That Would Make Consumers Aware.

  • High Security Protocols: Such As Those With Incorporation Of Newest Advanced Technologies In E-Commerce Platforms Including Encryption, Tokenization And Biometric Authentication Measures.

  • Stringent Rules: Frequent Updating Laws And Guidelines Towards The New Techniques For Cases Of Fraud.

  • Collaboration Between Sectors: The Private Sector And The Government Have To Partner With Cyber Security Experts Towards Threat Intelligence Exchange As Well As Best Practices.


Fraud In Online Transactions And E-Commerce Is Becoming A Great Growing Problem In The New Digital Economy Of India. Such An Existing Legal Framework Is Equipped With Very Effective Tools To Deal With The Challenges Posed By This Type Of Fraud; However, With The Change In Tactics Employed By Fraudsters And The Increases In Techno-Legal Complexities, It Needs To Be Continuously Adapted. India Can Take Steps In The Direction Of A Safe And Trustworthy E-Commerce Ecosystem Through Increasing Collaboration, Further Enhancing Consumer Awareness, And Technological Advances.


One Can Talk To A Lawyer From Lead India For Any Kind Of Legal Support. In India, Free Legal Advice Online Can Be Obtained At Lead India. Along With Receiving Free Legal Advice Online, One Can Also Ask Questions To The Experts Online Free Through Lead India.


Visit Us: — www.leadindia.law

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