The ruling of the single judge of Karnataka High Court holding that an e-commerce marketplace being an ‘intermediary’ is not liable for any action or inaction on the part of a vendor/seller has come as a significant relief for e-commerce portals and their directors/officers. The court thus proceeded to quash criminal proceedings against the Directors of e-commerce portal, Snapdeal.

Background of the case

Criminal proceedings were initiated against the Directors of e-commerce platform, Snapdeal for selling the pharmaceutical product under the brand name SUHAGRA-100 containing Sildenafil Citrate.

An individual, Mr. Manjunath placed online order of SUHAGRA-100 Tablets and received it on November 20 2014, from Snapdeal. The product was manufactured and sold by M/s Adept Biocare, a proprietary concern of Mr. Amandeep Chawla. In his complaint, the Drug Controller alleged that Snapdeal exhibited SUHAGRA Tablets for sale and provided a platform to the seller and purchaser. As Snapdeal had no drug license to sell SUHAGRA-100, it amounts to violation under Section 18(c) of the Drugs and Cosmetics Act, 1940 (‘DC Act’), which is punishable under Section 27(b)(ii) of the DC Act.

On June 8, 2020, Principal Senior Civil Judge and CJM, Mysuru issued an order of summons to Snapdeal and its directors. Aggrieved by the order, Snapdeal approached the High Court of Karnataka at Bangalore to quash the order dated June 8, 2020, passed against them, and further proceedings pending before Principal Senior Civil Judge and CMM, Mysuru.

Snapdeal and its directors (Petitioners) averred that:

  1. Snapdeal is an ‘intermediary’ defined under Section 2(1)(w) of the Information Technology Act, 2000 (IT Act). It is thus entitled to the exemption from liability in terms of Section 79 of the IT Act. Snapdeal as an intermediary has no control over what users may post on its platform, and it cannot be responsible for the listing and sale of products by third-party sellers on its marketplace.
  2. Snapdeal exercised ‘due diligence’ as envisaged under Section 79(2)(c) of IT Act read with Information Technology (Intermediaries Guidelines) Rules, 2011 by letting sellers know of “Prohibited Seller Activities and consequences Policy Document” that included Prescription Medicines and Drugs.
  3. The intermediary is only required to take down third-party content upon receipt of court order or notice issued by a government authority, as per Section 79(3)(b) of IT Act.
  4. There was a delay of nearly six years in filing the complaint considering the transaction occurred in 2014.
  5. The Petitioners are only Directors of the Company and are not involved in the company’s day-to-day affairs. Therefore, no offence is made out against them since they have no personal knowledge of the legality of the products sold by third-party sellers.

The State of Karnataka represented by Drugs Inspector (Respondent) contested the case and averred that:

  1. As Snapdeal owns a marketplace, it is sufficient to prosecute it for acts committed by sellers on its platform.
  2. Whether Snapdeal is considered an intermediary or not, no product can be advertised for sale contrary to the prohibition under the DC Act.
  3. The Mysore Court, where the product was ordered and delivered, could exercise jurisdiction.
  4. There is no delay in filing the complaint, and petitions filed by Snapdeal deserve dismissal.

Amongst various issues before the court, critical issues on intermediary liability were:

  1. Whether an intermediary as defined under Section 2(1)(w) of the IT Act is liable for any action or inaction on part of a vendor/seller making use of the facilities provided by the intermediary in terms of a website or a marketplace?
  2. Whether Snapdeal would be liable for sale of any item not complying with the requirements under the DC Act on its platform being an intermediary?

Court’s Decision

  1. The online marketplace is not expected to be aware of all the products sold on its website. The e-commerce platform/ intermediary is only required to maintain a robust system to inform sellers on its platform of responsibilities and obligations under applicable laws to discharge its role and obligations as an intermediary.
  2. Snapdeal/intermediary or its directors / officers, would not be liable for any action or inaction on the part of a vendor/seller making use of the intermediary facilities in terms of a website or a marketplace.
  3. 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. The Snapdeal has already complied with its obligation by removing the offending item.
  4. Snapdeal exercised ‘due diligence’ under Section 79(2)(c) of the IT Act read in conjunction with Information Technology (Intermediaries Guidelines) Rules, 2011.
  5. Snapdeal or its Directors cannot be made liable for offences punishable under Section 27(b)(ii) of the DC Act since the ingredients of Section 18 (c) of the DC Act were not fulfilled. Snapdeal has neither manufactured, sold, or distributed any drug or cosmetic. The manufacturer and seller of SUHAGRA-100 did all such acts.