Section 43A of ITA, 2000 : Section 43A: Compensation For Failure To Protect Data

Explanation using Example

Let's consider a hypothetical scenario. Imagine a company, XYZ Pvt Ltd., which operates an online shopping platform. They collect and store sensitive personal data from their customers, such as credit card information, addresses, and contact numbers. Despite being aware of the importance of data protection, the company fails to implement adequate security measures to safeguard this sensitive information.

One day, due to this negligence, their system gets hacked and the sensitive personal data of several customers gets stolen. As a result, some customers suffer financial loss as their credit card information was used for unauthorized transactions.

In this case, according to Section 43A of The Information Technology Act, 2000, XYZ Pvt Ltd., being negligent in implementing and maintaining reasonable security practices, would be liable to pay damages by way of compensation to the affected customers for their financial loss.