Case Summary and Outcome

The High Court of Delhi delivered a judgment clarifying the applicability of safe harbour provisions on internet intermediaries with respect to liabilities for posting of material by third parties on their platforms under the Information Technology Act and corresponding guidelines. The petitioner in this case, an online e-commerce platform, was selling products of an international brand which were allegedly posted on its platform by fake/unauthorised sellers. The respondents filed a first investigation report (“FIR”) against the petitioner, contesting that it violated several provisions of the Information Technology Act 2000 (“IT Act 2000”) and the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (“IT Guidelines, 2021”). Since the respondent was granted an absolute and exclusive right to sell the trademarked cosmetic products in India, both online and off-line, the petitioner was thus liable to take down content. The Court, relying on Shreya Singhal v. Union of India, held that the petitioner was only liable to take down content when a Court order has been issued, and even then, if there was any disobedience of the order, it would not amount to a criminal offence. Concluding that registration of an FIR against an intermediary would lead to miscarriage of justice, the Court thus quashed the FIR filed against the petitioner.

Facts

The petitioner in this case was Flipkart, a renowned Indian e-commerce entity, whereas the respondent was Ashish Girdhar (“Girdhar”), the Managing Director of Sanash Impex Pvt. Ltd. (Respondent No. 2), an authorised and exclusive distributor of the products under the trademark DC DERMACOL, an international, well-reputed brand of a Czech Company dealing with cosmetic products.

The present petition arose when Respondent No. 2, the authorised seller of the products under the trademark DC DERMACOL noticed the unauthorised sale of its goods to consumers on e-commerce platforms including that of petitioner’s platform. Following this, Respondent No. 2 filed an FIR against the e-commerce platforms under section 103 and 104 under the Trademarks Act and under section 63 of the Copyright Act. When the pre-investigation notice under section 91 of the Code of Criminal Procedure (“CrPC”), was sent to the petitioner, instead of responding to the notice, the petitioner filed the present petition seeking quashing of the FIR [para. 3 and 4].

The petitioner in the case argued that as per section 2(1)(w) of the Information Technology Act, 2000 (IT Act), it was an ‘intermediary’ as it provided a platform for sale of goods to sellers by way of the e-commerce website [para. 2] and thus liable for protection under section 79 of the IT Act, which guarantees “Safe-Harbour Protection” and protects intermediaries from any liability arising from content hosted/ posts made by third-parties on the intermediary platforms. The petitioner argued that until a Court order was served on the petitioner seeking removal of any material from its portal, the petitioner was not liable to remove any posts from its website.

Respondent No. 2, whereas, had not initiated any civil proceeding against the petitioner and therefore, no Court order had been issued.  In the absence of this, the FIR instituted against the Petitioner was mala fide and misplaced [para. 5]. The petitioner also apprised the Court that it was in compliance with the “due diligence” obligations under the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (“IT Guidelines, 2021”) which required intermediaries to clearly post the policy indicating the terms of use for posting content on the platform and material which was impermissible to be posted on the platform [para. 6].

In support of its case, the petitioner relied on multiple decisions of constitutional Courts including Sanchayni Savings Investments (I) Ltd. & Ors vs. State of West Bengal and Ors. (Civil Appeal No. 5168 of 2000), Shreya Singhal v. Union of India, 2015 (5) SCC 1, Sharat Babu Digumarti v. Government of NCT of Delhi, 2017 (2) SCC 18 and others), Lovely Salhotra and Anr. v. State (NCT of Delhi) & Anr., (2018) 12 SCC 391, Kent RO Systems Ltd. v. Amit Kotak, 2017 SCC OnLine Del 7201, PepsiCo India Holdings Private Ltd. v. Facebook & Ors. [CS(OS) 291/2018], Facebook Inc v. Surinder Malik, 2019 SCC OnLine Del 9887, Amazon Sellers Services Pvt. Ltd. v. Amway India Enterprises Pvt Ltd & Ors., 2020 SCC OnLine Del 454, Google India Private Limited v. Visaka Industries, (2020) 4 SCC 162 and order dated January 07, 2021 in Kunal Bahl and Anr. v. State of Karnataka [CRL.P 4676/2020] (para. 7).

Respondent No. 1 (“the State of NCT of Delhi”), in response, argued that the petitioner could not rely on the Shreya Singhal judgement as it related to freedom of speech and restrictions to the same under Article 19(2) of the Constitution of India (Constitution) and the constitutional validity of Section 66A of the IT Act. The present case, however, dealt with the freedom to trade under Article 19(1)(g) of the Constitution. Therefore, the decision in Myspace Inc. V. Super Cassettes Industries Ltd 2016 SCC OnLine Del 6382 was applicable to the present case (para. 8) instead. Respondent No. 1 also submitted that as per the IT Guidelines 2021, once the Petitioner had received “actual knowledge” from the complainant, there was no requirement for a Court order before the offending material could be taken down. On this front, it should be noted that after receiving the complaint, the petitioner had taken down four (4) of the ten (10) infringing sites without any Court order. On this basis, Respondent No. 1 argued that there was no logic in the petitioner’s insistence on a Court order for the remaining 6 sites. Relying on rule 3(2)(d) and rule 3(4) of the IT Guidelines 2021, Respondent No. 1 submitted that if upon receiving actual knowledge about the sale of fake products, the petitioner did not take necessary remedial measures to address the situation, the petitioner failed to adhere to “due diligence” requirements mandated under the IT Act. Respondent No. 1 also relied on Neeharika Infrastructure Pvt. Ltd. v. State of Maharashtra 2021 SCC OnLine SC 315  to submit that investigation could not be stopped as was sought in the petition. Further, the FIR also could not be quashed as the petitioner did not meet the criterion of “rarest of the rare” cases requiring quashing of an FIR [para. 8 and 9].

Respondent No. 2, on similar lines, submitted that only when the petitioner complied with section 79 of the IT Act as a whole and did certain acts under section 79(2), while not doing acts which would strip the safe harbour protection under section 79(3) of the IT Act, could it take shelter under the safe harbour rule. Further, it was a subject matter of trial to decide whether the petitioner was an intermediary or not. [on this front, Respondent No. 2 relied on Google India Private Limited v. Visaka Industries, (2020) 4 SCC 162 and Amazon Sellers Services Pvt. Ltd. v. Amway India Enterprises Pvt Ltd & Ors 2020 SCC OnLine Del 454, Abdul Sathar v. Nodal Officer, Anti-Piracy Cell, Kerala Crime Branch Office, 2007 SCC OnLine Ker 4, Myspace Inc. v. Super Cassettes Industries Ltd., (Supra), Christian Louboutin Sas v. Nakul Bajaj 2018 SCC OnLine Del 12215 and others, Kent RO Systems (Supra), Luxottica Group S.P.A. v. Mify Solutions Pvt. Ltd., 2018 SCC OnLine Del 12307, Amway India Enterprises Pvt. Ltd. v. 1MG Technologies Pvt. Ltd., 2019 SCC OnLine Del 9061 (para 10 and 11).

The petitioner rebutted that Shreya Singhal case dealt directly with section 79 of the IT Act and therefore, was applicable to the present case. As per Shreya Singhal, it was only pursuant to a Court order that an intermediary such as the petitioner would be liable to take down the sites. Petitioner relied on Google India Private Limited to argue that the judgement already recognised petitioner as an intermediary and therefore, there was no occasion for any proof or a trial in this regard. It was further argued that a FIR could only be filed by a copyright owner (as per decisions in Nagin Chand Jain v. State of U.P. 1981 SCC OnLine 653 and B. Balu v. State, 2021 SCC OnLine Mad 14944), whereas Respondent No. 2 was merely an authorised entity to sell the goods and did not have any copyright assigned to them. Petitioner relied on Kent RO Systems Ltd and Ors v. Amit Kotak and Ors. 2017 SCC OnLine Del 7201 to submit that the only obligation on the petitioner was to make the policy known to the third parties and no further obligation ensued in its status as an intermediary (para. 13).

Finally, the petitioner relied on A.P. Mahesh Coop. Urban bank Shareholders Welfare Assn. v. Ramesh Kumar Bung, (2012) 9 SCC 152 to submit that an FIR could be quashed and investigations stopped in case of miscarriage of justice, as had been in the present case [para. 14].

Decision Overview

Asha Menon, J delivered the judgment of the High Court of Delhi. The principal question before the High Court was whether the due diligence requirement under Rule 3 of the IT Guidelines 2021 would render the intermediary eligible for exemption from criminal liability.

Under section 2(1)(w) of the IT Act, an intermediary is defined as any person who on behalf of another person receives, stores or transmits that record or provides any service with respect to that record. Under section 2(1)(za), an originator does not include an “intermediary.” It is worthwhile to note that under section 79 of the IT Act, intermediaries are exempted from liability for any third party information, data, or communication link made available or hosted by him. This is applicable in either of the following cases (a) (a) the function of the intermediary is limited to providing access to a communication system over which information made available by third parties is transmitted or temporarily stored or hosted, (b) (b) the intermediary does not– (i) initiate the transmission, (ii) select the receiver of the transmission, and (iii) select or modify the information contained in the transmission, and (c) the intermediary observes due diligence while discharging his duties under this Act and also observes such other guidelines as the Central Government may prescribe in this behalf. With respect to (c) above, the obligation of the intermediary is to observe due diligence and follow the guidelines that may be prescribed by the Government in this behalf.

Given the above, the Court considered the definition of “intermediary” and “originator” under Section 2(1) and relied on Google India to reiterate that e-market portals like the petitioner were already recognised as intermediaries. The Court further observed that IT Act does not recognise trademark or copyright infringement as offences. The only obligation under section 79 of the IT Act is for the petitioner to observe due diligence and follow the guidelines prescribed by the government [paras. 16 – 21].

Based on this analysis, the Court concluded that non-compliance with the IT Guidelines 2021 did not constitute an offence under the IT Act. Since this was the case, the Court subsequently delved on whether a FIR could even be registered against an intermediary for offences under the Indian Copyright Act and Trademarks Act. The Court opined that by being an e-market portal that allowed the infringers to sell the fake products, the petitioner could appear to have abetted the commission of the offence under section 63 of Copyright Act and section 103 of the Trademark Act [paras. 22 and 23].

As the matter in this case related to criminal liability, the Court analysed whether the compliance with the “due diligence” requirement under rule 3 of the IT Guidelines 2021 would also entitle the intermediary to an exemption from criminal liability [para. 24]. The Court noted that there was a higher standard of proof required to prove criminal liability. Such higher standard is also applicable to Courts to determine whether an intermediary would be liable under the criminal law for action or inaction. The Court held that if safe harbour protection is available to intermediaries qua civil liabilities, the immunity should unquestionably be afforded in case of criminal liabilities which required a higher standard of culpability. An intermediary would be afforded safe harbour protection under section 79 of the IT Act unless an active role is disclosed in the commission of offence, in which case, the intermediary would not be entitled to the immunity. Therefore, if an intermediary is ex facie in compliance with the “due diligence” obligations under rule 3 of the IT Guidelines, it would enjoy the safe harbour protection even in case of criminal prosecution [para. 25]. Notably, the petitioner had complied with the IT Guidelines 2021 by putting the “terms of use” and intimating the users that they cannot display anything that belongs to others and over which there is no right [para. 26].

The next question dealt by the Court was whether the information provided by the complainant would suffice to obligate the petitioner to take down the allegedly offending information/sites/products. On this, the Court concluded that receiving information of the infringing content from a complainant did not constitute “actual knowledge” requiring the removal of access / take down under rule 3(2)(d) of the IT Guidelines. It held that any claim to a trademark or copyright is itself strongly contested in civil Courts. Therefore, the intermediaries cannot be made to determine the veracity of user allegations and take down content on the basis of such complaints. The Court also opined that keeping a mechanism where intermediaries are made to take down content on the basis of user complaints would create havoc in e-commerce platforms as this may be misused by infringers to file complaints against legitimate trademark or copyright owners [para. 27]. Therefore, relying on Shreya Singhal, the Court held that the petitioner is only liable to take down content when a Court order has been issued – and even then – if there is any disobedience of the order, it would not amount to a criminal offence [para. 28].

Given the above, the Court observed that the petitioner could not be declared an offender, specifically when it appeared on the face that the petitioner had committed no offence. The Court, thereafter, relied on State of Haryana v. Bhajan Lal 1992 Supp (1) SCC 335 and Asian Resurfacing of Road Agency (P) Ltd. v. CBI (2018) 16 SCC 299 to state that when the whole case is not disclosed in the FIR, it was well within the Court’s inherent powers to quash the FIR to prevent the miscarriage of justice and abuse of process of law [para 29 and 30].

The petition was allowed and the FIR was thus, quashed. However, the Court allowed the further investigation to ascertain other infringers.