The digital landscape in Nepal underwent a transformative shift with the transition from traditional paper-based transactions to electronic commerce. Electronic signatures (e-signatures) are legally recognized in Nepal, primarily governed by a “tiered” legal model. While the law recognizes various forms of electronic authentication, it places the highest evidentiary value on “Digital Signatures” that utilize asymmetric cryptosystems and are backed by certificates from licensed Certification Authorities (CAs).
In the Nepalese context, an e-signature is not merely a scanned image of a handwritten signature. To have full legal equivalence to a “wet-ink” signature in most official and high-stakes transactions, the signature must meet stringent technical requirements defined under the national regulatory framework.
Legal Framework
The legality of e-signatures in Nepal is established through several key pieces of legislation and regulatory bodies:
A. The Electronic Transactions Act (ETA), 2063 (2006)
The Electronic Transactions Act, 2063 is the primary legislation governing cyber laws and digital signatures in Nepal.
- • Section 3 & 4: Grants legal recognition to electronic records, stating that no record shall be denied legal validity solely on the ground that it is in electronic form.
- • Section 15: Specifically addresses the legal recognition of digital signatures. It stipulates that if any law requires a signature, that requirement is satisfied by a digital signature executed in a prescribed manner.
- • Functional Equivalence: The ETA establishes that electronic signatures are the legal equivalent of handwritten signatures, provided they are “reliable” and “authenticated.”
B. The Electronic Transactions Rules, 2064 (2007)
These rules provide the procedural framework for the implementation of the ETA. They define the roles of:
- • The Controller of Certification Authority (CCA): The government body (under the Ministry of Communication and Information Technology) that licenses and regulates CAs.
- • Certification Authorities (CAs): Entities authorized to issue Digital Signature Certificates (DSCs) to individuals and organizations.
C. The Evidence Act, 2031 (1974)
The Evidence Act was amended to accommodate digital evolution. It allows for the admissibility of electronic records as evidence in a court of law, provided the authenticity of the digital signature can be verified through the certificate of a licensed CA.
Documents That Can Be Signed Electronically
In Nepal, most commercial, corporate, and personal transactions can be executed using electronic or digital signatures. These include:
i. Commercial Contracts: Sales agreements, service contracts, and vendor agreements.
ii. Corporate Filings: Many interactions with the Office of the Company Registrar (OCR) now allow or require digital signatures for document submission.
iii. Banking and Finance: Online banking instructions, loan applications (subject to individual bank policies), and e-commerce transactions.
iv. Taxation: The Inland Revenue Department (IRD) utilizes electronic signatures and digital logins for tax filings and VAT returns.
v. Government-to-Citizen (G2C) Services: Increasing numbers of permit applications and official correspondence are being digitized.
For internal business operations (e.g., HR letters, internal memos), simple electronic signatures are often used. However, for documents submitted to government regulators, a Digital Signature Certificate (DSC) issued by a licensed Nepalese CA (like Nepal Certifying Authority) is typically required.
Documents That Cannot Be Signed Electronically
Despite the broad scope of the ETA, there are critical exclusions where electronic signatures are not permitted, or where the law remains silent/restrictive, necessitating physical presence and “wet-ink” signatures:
i. Wills and Testamentary Dispositions: Documents related to inheritance and the distribution of property after death must be executed on paper.
ii. Trust Documents: The creation of a trust generally requires traditional paper documentation.
iii. Power of Attorney (PoA): For the transfer of immovable property (land/buildings) or for use in certain court proceedings, a PoA must be physically signed and often notarized or registered in person.
iv. Real Estate Transactions: Sale deeds, mortgage deeds, and lease agreements involving land must be registered at the Land Revenue Office (Malpot) with physical thumbprints and signatures.
v. Negotiable Instruments: While digitizing, certain checks and promissory notes still rely on physical signatures for traditional clearing and legal protection under the Negotiable Instruments Act.
vi. Marriage and Divorce Certificates: Matters of personal status and family law require physical signatures before a government registrar.
Notable Changes and Modern Developments
The Proliferation of SaaS and Local CAs
Initially, digital signatures were underutilized due to a lack of local infrastructure. Recently, the licensing of local CAs has made Digital Signature Certificates (DSCs) more accessible to the public and businesses.
The “Digital Nepal Framework”
The government’s “Digital Nepal Framework” aims to integrate digital signatures across all tiers of government. This has led to the adoption of e-signatures in the public procurement system (e-GP), where bidders must use digital signatures to submit tenders.
Admissibility Challenges
While the law is clear, the Nepalese judiciary is still in a transitional phase. Courts now accept digital evidence more readily, but the burden of proof often lies on the person producing the electronic record to prove that the “private key” was under the sole control of the signer and that the certificate was valid at the time of signing.
Technical Requirements for Validity
To ensure an e-signature is legally “secure” under Nepalese law (ETA Section 16), it must:
- • Be unique to the person using it.
- • Be capable of identifying such person.
- • Be created in a manner or using a means under the exclusive control of the person.
- • Be linked to the electronic record in such a manner that if the record is altered, the digital signature is invalidated.
Disclaimer
The information on this site is for general information purposes only and is not intended to serve as legal advice. Laws governing the subject matter may change quickly, so Flowmono cannot guarantee that all the information on this site is current or correct. Should you have specific legal questions about any of the information on this site, you should consult with a legal practitioner in your area.
References
1. The Electronic Transactions Act, 2063 (2006): The primary legislation of Nepal.
2. The Electronic Transactions Rules, 2064 (2007): Procedural regulations.
3. The Evidence Act, 2031 (1974): Regarding the admissibility of digital records.
4. Negotiable Instruments Act, 2034: Regarding financial instruments and signatures.
