Are Internet Intermediaries liable for actions of vendors on e-commerce marketplace: Karnataka High Court answers

Are Internet Intermediaries liable for actions of vendors on e-commerce marketplace: Karnataka HC answers

The Karnataka High Court headed by a single judge, Justice Suraj Govindaraj, held "the only liability of an intermediary under Section 79(3)(b) of the IT Act is to take down third-party content upon receipt of either a court order or a notice by an appropriate government authority and not otherwise", while quashing a complaint lodged against the E-Commerce Company Snapdeal.

The brief background of the case was that, the Drug Inspector had lodged a complaint on the basis of information allegedly received by the Deputy Drugs Controller, Mysore on 20th November, 2014.

It was alleged that in October 2014, M/s Adept Biocare, a proprietary concern of one Mr. Amandeep Chawla, created a seller account on Accused No. 2's (Snapdeal Company) online marketplace for listing and selling his own products. The Company Snapdeal had warned Accused No. 1 to not to sell the said tablets on the Website, during the period between 13th October, 2014 and 16th December, 2014.

It was later alleged that Snapdeal had exhibited Sildenafil Citrate Tablets 100 mg for sale and provided a platform to seller and purchases which was technically in violation under Section 18 (c) of the Drugs Cosmetics Act and is punishable under section 27 (b) (ii) for the same.

Appearing for the petitioners, Senior Advocate C V Nageshwarappa that, "An order taking Cognisance is required to be done by way of a speaking order and the said order requires to be passed after due application of mind.The sine qua non for taking cognisance of an offence is the application of mind by the Magistrate and his satisfaction that the allegations, if provedwould constitute an offence, in the present case, a mere perusal of the Impugned Order makes it abundantly clear that the same does not disclose application of mind."

It was also asserted that concept of 'vicarious liability' is unknown to criminal law. There is no specific allegation made against any person but the members of the Board and senior executives are joined as the persons looking after the management and business of the appellant Company.

It was contended that Snapdeal is an intermediary as defined under Section 2 (1) (w) of the Information Technology Act, 2000 as amended by the Information Technology (Amendment) Act, 2008 and was therefore entitled to the exemption from liability in terms of Section 79 Information Technology Act, 2000. In addition, the company and the directors had approached to the court seeking to quash an order dated 8th July, 2020 and further proceedings pending before the Prl. Senior Civil Judge and CMM, Mysuru charged for violation of Section 18 (c) of the Drugs and Cosmetics Act.

The Court after examination of relevant facts observed that, "the Magistrate failed to consider that "market place model of e-commerce" is recognised in Indian law and policy by referring to Press Note 3 of 2016 issued by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India recognises whereunder the e-commerce entity only plays the role of a facilitator between the buyer and Seller, and does not have ownership over the goods sold."

"The order of cognisance dated 8.6.2020 is not in compliance with the requirement of Section 191(1)(a) of the Cr.P.C and further does not indicate the procedure under Section 204 of Cr.P.C having been followed", the Court further added.

The Court also elaborated that no inquiry is needed to be conducted in the event of the accused being an individual, who has a temporary residence within the Jurisdiction of the Magistrate. However, when the accused has no presence within the Jurisdiction of the Magistrate where the offence has been committed, then it would be mandatory for an enquiry under Section 202 of the Cr.P.C. to be held.

The Court lastly concluded that Snapdeal has exercised 'due diligence' under Section 79(2)(c) of the Information Technology Act, 2000, read in conjunction with the Information Technology (Intermediaries Guidelines) Rules, 2011.

"When Snapdeal/Accused to. 2 Company is exempted from any liability under Section 79 of the Information Technology Act, 2000, no violation can ever be attributed or made out against the directors or officers of the intermediary, as the same would be only vicarious, and such proceedings as initiated against them would be unjust and bad in law."

With these observations, the Court acquitted Snapdeal and held that neither Snapdeal nor its Directors can be or made liable for alleged offences punishable under Section 27(b)(ii) of the Drug and Cosmetics Act. The Court delivered the following judgment:

"Only a Court in which the accused has a presence, like registered office, branch office, corporate office or the like could exercise Jurisdiction as regards an offence relating to an e-commerce transaction. However, this would not apply to a Cyber Crime, which comes under global jurisdiction according to the IT Act, 2000. This means that any cyber-crime complaint can be registered with any of the cyber cells in India, irrespective of where the crime was originally committed."