AI & the Law: Navigating the AI Legal Landscape in India

Businesses across healthcare, fintech, governance and more are embracing AI. But without a clear AI legal framework, they expose themselves to risks—from data bias to IP disputes and automated decision liabilities. Indian companies must proactively navigate this evolving legal terrain to innovate responsibly and stay compliant.

The Current Legal Framework: Gaps & Grey Areas

India doesn’t yet have AI-specific legislation, but several laws still apply:

• Information Technology Act, 2000: regulates data security and intermediary liability .
• Digital Personal Data Protection Act, 2023 (DPDP Act): mandates consent and security for data used in AI
• Indian Contract Act, 1872: applies to AI-executed agreements
• Copyright Act, 1957: only recognises humans as authors, leaving AI-generated works in a legal void
• Guidelines from NITI Aayog and MeitY emphasise AI ethics, fairness, and human oversight

Despite growing AI adoption, legal frameworks remain patchwork—creating clarity gaps for businesses.

1. Why India Faces Rising AI Legal Risks

• No single regulator for AI—it’s governed across sectors
• Lack of defined accountability for automated decision-making
• Deep-seated societal biases in training data
• No clear property rights for AI-created content

These gaps leave firms vulnerable to discrimination suits, rights infringement, or unfair decisions.

2. Top Legal Challenges in the Indian AI Ecosystem

• AI Ethics & Bias Control

AI tools in hiring or loan approval may exhibit bias based on caste, gender, or region—violating constitutional equality under Article 14. Civil society increasingly calls for AI ethics standards, especially after concerns in PILs against algorithmic facial recognition.

• Data Bias & Liability

Biased data—like low female representation—can lead to discriminatory machine outcomes. Without bias audits, companies risk lawsuits under consumer protection laws or privacy acts.

• Intellectual Property in AI

Who owns AI-generated logos, reports, or software? Under Section 2(d) of the Copyright Act, only humans qualify as authors. In Novatex v. Narula & Sons (2023, Delhi HC), the court held that AI logos lacked copyright unless human creative input was demonstrated .

• Automated Decision Accountability

When an AI system rejects a loan or evaluates performance, the affected individual must have recourse. Courts like Delhi HC are increasingly requiring transparency and appeal mechanisms for automated decision-making.

3. Proactive Steps for Indian Businesses

• Conduct AI Bias Audits
  Engage third parties to detect and report discrimination. Maintain records to show good faith and ethical AI use.
• Build Transparency & Oversight
  Introduce explainable decision layers in AI systems. Maintain logs and human review points.
• Secure IP for AI Outputs
  Draft contracts assigning human ownership for machine-generated content or code. Include vendor obligations if using third-party data/training sets.
• Adopt AI Ethics Policies
  Implement internal codes that address fairness, accountability, and human oversight. Align with frameworks like UNESCO, NITI Aayog, and MeitY for responsible AI.
• Ensure Data Protection Compliance
  Follow DPDP Act: record consent, define data use purpose, appoint a Data Protection Officer, and conduct breach notifications
• Monitor Evolving Regulations
  Stay updated on:
  • MeitY advisories on labeling “unreliable” tools
  • Formation of AI Safety Institute to ensure ‘safe and trusted’ AI
  • Copyright review panel for AI-generated content

4. Looking Ahead: The Future of AI Legal in India

India is on course to introduce a centralised AI law—possibly modeled after the EU’s AI Act—covering high-risk AI, ethics audits, IP clearance, and mandatory risk assessments. Regulators will demand automated decision disclosures, and courts will require traceable accountability and redress processes

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