Where is the Net4India resolution? Why the Government of India is silent?

I refer to the various articles regarding the Net4India issue and it appears that time has come to question the wisdom of the Government of India in not intervening in the NCLT proceedings regarding the Net4India issue.

To summarize the developments till now, Net4India was a leading domain name registrant in India and lakhs of Indians registered domain names with the company and many thousands also availed other services for hosting their domain names and e-mail services from them. The company was therefore a critical service provider for Internet based activities in India.

The company however stopped its operations some time back and customers found out that an NCLT proceeding had been initiated by Edelweiss Asset Reconstruction Company to which State Bank of India assigned the debts of the company.

It is not clear how SBI came to run the huge debt against the Company and whether there was any internal vigilance enquiry or CBI enquiry from the Ministry of Finance or RBI. It appears that there was no such enquiry and there was a massive fraud in SBI resulting in an NPA of more than 200 crores when SBI quietly shifted the action to NCLT.

Until the matter was brought to open by Naavi.org, there was no clarity on why Net4India was not servicing their customers properly. Now the reason for the partial closure of the operations has become clear. It is due to the insolvency proceedings that has been initiated for the recovery of the SBI loan through Edelweiss Asset Reconstruction company.

However, we can identify that there were many faults by NCLT, SBI etc which has resulted in the current crisis. It is also not clear if in the assignment of debt from SBI to Edelweiss whether the valuation was done fairly. These are subject matters for the  Finance Ministry to consider. Nothing less than a CBI enquiry into the way by which the debt was built up in SBI, how it was assigned to Edelweiss and how they tried to suppress the digital assets of Net4India either by design or ignorance causing losses to lakhs of citizens of the country.

Some of the omissions of NCLT and others can be listed as follows.

a) Not ensuring that the notice about the insolvency proceedings was displayed on the website of Net4India website which is the contact point for the lakhs of its customers many of whom were also small creditors of the company.

b) NCLT not properly understanding the business of Net4India nor making an assessment of its digital assets before they ordered the sale of its properties and starting the insolvency proceedings.

c) From the order dated 25th September 2020, it is now clear that the NCLT has been fully appraised now. However the website of Net4India still sports the “Covid Notice” and there is no notice of the proceedings.   Though it is little significance now since  the customers of Net4India have been wronged by NCLT and that cannot be reversed, the fact that NCLT does not even now realize that it ought to ensure that a notice on all Net4India websites speaks volumes about the knowledge and efficiency of our judicial system in facing the challenges of the Digital era.

d) Since the Judges manning NCLT are the previous generation judges, it is the responsibility of the IT Ministry and the Law Ministry to actually organize appropriate training to the judges in the NCLT which makes them realize that today there is no company in India which does not have digital assets. In many instances the digital assets may far outweigh the physical assets and in all insolvency proceedings it should be mandatory for NCLT to recognize the presence of digital assets and how its value may be unlocked before proceeding with the insolvency petition.

e) The Government of India is presently considering the “Non Personal Data Governance Act” based on the report of the Kris Gopalakrishna Committee. This Act envisages setting up of a “Data Exchange” where non personal data can be sold for value like shares in BSE/NSE. On the other hand, NCLT which has thousands of corporate insolvency petitions seems completely ignoring of the value of data as a corporate asset.  Had the special nature of the business of Net4India been factored into the insolvency proceedings, the revelations in the order of 25th September 2020 would have surfaced in the first hearing itself. In that case, even before the immovable property belonging to the company was sought to be sold, the digital assets would have been encashed by transferring the business of the Domain Name registration to another entity as a “Going Concern”.

f) It is also time for NCLT to give confidence to the corporate world if they follow the concept of value of an asset on a “Gone Concern Basis” or a “Going Concern Basis”. If law recognizes “Intellectual Property” and we have a whole system for protecting, transferring and selling Trademarks, Copyrighted works , Patents etc, the law should also recognize that a substantial part of the value of IPR exists on a “Going Concern” basis. When there is an insolvency proceedings, unless special care is taken the IPR such as Trademarks come down to Zero. However, before the value of a trademark comes down to Zero, there could be companies in the similar business who may like to take over the trade mark or other rights so that some value can be realized before applying the insolvency hammer. Similarly the digital assets of Net4India can be valuable as a going concern and become zero as a gone concern. NCLT should try to preserve the value by adopting the Going Concern basis of valuation as long as feasible.

g) In the Net4India case, the lakhs of customers would have been happy if another registrar had taken over the business and provided business continuity to their operations which depended on the domain names and other ISP services registered with Net4India.

I would like NCLT to give a thought to what would happen if the domain name nclt.gov.in stops functioning from tomorrow or some cyber squatter diverts the domain. What if the e-mail address of the registrar of NCLT or the RPs stops functioning from tomorrow.

Then the cost that NCLT will have to pay for restoring its operations  is the value of the domain name nclt.gov.in or the e-mail address registrar@nclt.gov.in.

NCLT should ask itself whether  this value is reflected in the NCLT asset register.

I am separately discussing the valuation of data assets in a follow up article. But for the time being I want to only highlight that if one domain name of nclt.gov.in is having such value that if it is stopped there would be chaos in the country, then imagine that Net4India had more than  70000 domain names registered by different individuals and companies in India who were given a scare that their business doors have been closed because NCLT did not recognize that the insolvency proceedings will indirectly drive many others into insolvency or at least significant losses.

h) Again, I am willing to concede that the Judges of NCLT did not study valuation of data during their LLB days nor encountered such issues during the days when they grew in the system to don the responsible position they hold today.

But Does not MeitY know the value of data asset and how it can affect the proceedings of asset reconstruction and insolvency?.

Does not Finance ministry which oversees the Insolvency act know?

Does not Edelweiss reconstruction which was the petitioner know?

Does not SBI which gave a loan of 200+ crores to Net4India  know?

I feel that all these agencies lacked the vision to understand that their action in trying to collect their debts of Rs 200 crores could jeopardize the assets worth thousands of crores of the customers of Net4India?

Do they know that even an innocuous domain name like naavi.org is valued nearly a lack of rupees though it may take only Rs 700 per year to maintain it?. If it is so, we can imagine what would be the value of 70000 plus domain names alone which the proceedings have jeopardized.

Who is responsible for this?

Digital India wants to know if all these agencies including NCLT is willing to apologize to the public for their ignorance?

Will the Meity or Law Ministry or Finance Ministry take the responsibility for not creating the awareness about the value of data with the NCLT judges?.

In most compliance measures we say that “Awareness training” is a pre-requisite for a company. Is this not a pre-requisite before judges are appointed to the NCLT or RPs pass the examination?

i) Even though NIXI has assured that dot.in domain names will be transferred out of Net4domains and AuthCodes have been released in recent weeks, the transfers are yet to be completed since after the new registrar requests for confirmation of transfer, no response is coming from net4India. I hope NIXI will look into this and ensure that the transfers get completed.

j) While NIXI has shown some concern in attending to the dot in domain holders, ICANN remains to be intransigent. ICANN is still insisting that unless its dues from Net4India is cleared, they will not allow transfer of domains in the generic TLDs.  They are only affecting the domain name registrants by their actions and not the Registrar.

k) ICANN failed in its due diligence in not taking action in time when Net4India was converting itself into a reseller and roped in another entity to defraud the customers who had no clue on how this transfer would affect them. Now the NCLT order of 25th September indicates that Net4India committed a fraud by retaining its main registrar contract with ICANN without making payment of dues but shifted the revenue generating business to another entity. All companies who are part of this “Domain laundering” must be identified and punished.

l) If all the above actions are to be taken, then the MeiTy has to step in and take the responsibility for resolving the issue.

We must consider that Net4India is an indicator of the shortcoming in the ICANN system of Domain Name registrations appointing registrars without proper due diligence. Hence this matter needs to be addressed at the ICANN policy level also so that business failures of registrars does not hold the world to ransom.

I want ICANN to imagine the impact on the global economy if GoDaddy stops its business today for whatever reason.

Indian Government has to think if it is possible for  ICANN to hold Indian Government to ransom by threatening the closure of the domain name registries. What is the guarantee that this will not happen some time in the future when ICANN management comes under the control of China -Pakistan-North Korean nexus? .

Since ICANN does not have a solution for this, can Indian Government continue to keep Indian digital economy dependent on ICANN registrars? Is it not time for the Indian Government to ensure that the interests of the Indian citizens is protected by ensuring that all domain name registrations of Indian citizens are under the control of the Indian Government and not external body can threaten us to shut down our digital system.

This requires that NIXI should be given the responsibility for all TLDs registered by an Indian citizen. For this process, the domain name registration system should have a “Right of the Nation” clause and the registrant should be provided an option to appoint a Government of his choice or by default the Government of a country of which he is a citizen as the controller for the domain. In the event of contingency where the registrar stops business ICANN should enable the designated Government to take over control of the said domain.

If Internet is considered a human right, there is a need to ensure that the domain name registration system is also secured properly so that the Net4India issue should be the last such incident in India.

Countries all over the world are passing personal data protection laws to protect the right to privacy of their citizens. Domain Name registration represents the Right to do digital business and it needs to be also protected. Fortunately we donot need a separate law for this purpose and we can bring it under our Information Technology Act 2000. We can consider the situation like what we are now facing as a “Denial of Access” and an offence under Section 66 of ITA 2000. Every one who is directly and indirectly responsible for this situation should be prosecuted under ITA 2000 so that they donot mess with the digital asset system.

In the meantime, watch out for my views on the valuation of digital assets for which the Chartered Accountant Community has to make some changes in their accounting practices.


(Comments welcome)

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About Vijayashankar Na

Naavi is a veteran Cyber Law specialist in India and is presently working from Bangalore as an Information Assurance Consultant. Pioneered concepts such as ITA 2008 compliance, Naavi is also the founder of Cyber Law College, a virtual Cyber Law Education institution. He now has been focusing on the projects such as Secure Digital India and Cyber Insurance
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11 Responses to Where is the Net4India resolution? Why the Government of India is silent?

  1. Krishnanagar says:

    This is very critical and concerns lakhs of stakeholders. Unfortunately, no one seems to have realised the gravity of the situation. Image tomorrow BSNL shuts down all operations. What would happen to millions of mobile #s which are linked to receive OTP for financial transactions. Similarly, because of insolvency of Net4 India, many web sites, emails will become non functional overnight and there is no recourse for the end consumer.

  2. Kunal says:

    Thank you so much Sir for standing with poor Net4India customers. I have written to ICAAN and Open Provider for help but no response so far. It seems they don’t care at all. This is a very serious matter and they don’t realize that thousands of businesses will be affected by this crisis if a solution is not found soon. We can only pray and hope the Government listens to the SOS call and do something.

  3. We all have suffered doing business with Net4India and waiting for some solution to get our domain and digital business back on track. This is a cyber threat and if government doesnt intervene will be a huge chaos . I thank Naavi.org to aptly take this matter forward , hoping some resolution to the concerned.

  4. Thanks Naavi for taking this issue. We at The Online have over 1300 domains registered with Net4 as their domain reseller from past 7 years. Out of the total 1300, We only own 11 domains, and rest domains are owned/registered in name of our worldwide customers and especially Indian customers. Most of our customers’ domains have stuck with Net4. Neither they’re getting renewed nor transferred-out. Net4 is not sending EPP/Auth/Transfer code at all. Earlier we helped many of our Net4 customers to transfer-out domains to our other upstream providers viz. Wild West Domains and 1Api. That was quite successful, but lots of customers preferred to stay with Net4 and now their domains are not getting renewed/transfered-out.

  5. Regis Xavier says:

    Keep me posted on developments.

  6. Manik Sarin says:

    Thanks Naavi for taking up the matter. We, as customers are facing a huge challenge in the given situation.

  7. adbangs technologies provide you the best price domain register transfer. we will give you full support to flourish digitally . Please visit our website https://adbangs.com/

    • Dear Adbangs,

      Please let me know how you are helping the victims of Net4India…Kindly give me a separate introduction of yourself. I want to publish this so that people donot think that there is any commercial interest of Naavi.org in promoting adbang.

  8. Mahesh Mohan says:

    In case you are facing any issues with domains registered with Net4, following are the contact details.

    Mr Pankaj Shukla (+919650821618 / pankaj.s@net4.com)


  9. Rohit Sharma says:

    Dear Naavi,
    I loved the way you explained each and every bit of the NET4 issue, Govt Issue and ICANN’s powers.

    I had a client who’s domains were stuck at net4. Fortunately and unfortunately, we were able to transfer the .IN domain with the help of NIXI. Their .COM domain is still with them to which our emails haven’t been answered.

    There was a post on ICANN’s website: https://www.icann.org/en/announcements/details/update-on-net-4-india-limited-25-3-2021-en

    I have worked for one of the top ccTLD registrars and found that their work ethic pertaining to maintaining service levels was exemplary. In our case, net4 just didn’t had it in them to use their resources well.

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