On January 7, the Karnataka High Court quashed a criminal complaint against Snapdeal and its executives Kunal Bahl and Rohit Bansal. The criminal complaint alleged that Snapdeal and its executives violated the Drugs and Cosmetics Act by allowing the sale of Suhagra 100, a prescription medicine used for erectile dysfunction.
The court said that an intermediary and its executives cannot be held liable for the actions of the sellers, who make use of its marketplace to buy or sell items. The judgment, passed by the single-judge bench of Justice Suraj Govindaraj, also ruled the following:
- A court can exercise jurisdiction in an offence relating an e-commerce transaction only if the e-commerce company has presence, in the form of a registered office, brand office, corporate office or the like, in the area falling within the court’s jurisdiction. Only cyber crimes are exempt from this.
- If the e-commerce company does not have an office under a court’s jurisdiction, the court needs to carry out an enquiry under Section 202 of the Criminal Procedure code to decide whether issuing summons to somebody falling outside its jurisdiction is necessary for the proceeds of the case.
The High Court also took into account the unreasonable delay of six years between the offence (sale of Suhagra), which occurred in 2014 and the eventual filing of the complaint in June 2020. It declared that there is “no acceptable explanation” of the “highly belated” filing of the complaint and that the “delay is fatal to these proceedings”.
The case and the complaint
In June 2020, the Drug Inspector of Mysore had filed a criminal complaint on the basis of information received by the Deputy Drugs Controller of Mysore in November 2014. The complaint alleged that in October 2014, M/s Adept Biocare created a seller account on Snapdeal, and sold prescription tablets of Suhagra-100 (Sildenafil Citrate Tablets 100 mg).
Between October and December 2014, Snapdeal had warned Adept Biocare to not sell the tablets. However, one Manjunath placed an order for Suhagra on Snapdeal that was delivered to the customer in presence of an Investigation Officer and otherwitnesses, which created grounds for action.
The criminal complaint was filed before the court of the principal senior civil judge and Chief Judicial Magistrate of Mysuru, which issued summons to Snapdeal and its directors. It’s worth noting that although the Deputy Drugs Controller’s complaint was filed in 2014, the Drug Inspector filed a criminal complaint six years later in 2020. The complaint was filed against Snapdeal, Bahl, and Bansal under the provisions of the Drugs and Cosmetics Act, specifically under:
- Section 18(c), which prohibits the manufacture, sale, exhibit, distribution of offering for sale of any drugs without a license, and;
- Section 27(b)(ii), which penalizes the violator with a fine of 3-5 years and a minimum fine of Rs 1 lakh, or three times the value of drugs under question, whichever is higher.
C Nageshwarappa, the lawyer for Karnataka government, said that the fact that the petitioners (Bahl and Bansal) own the Snapdeal marketplace is sufficient to prosecute them for any offence or violation committed by any seller on the platform. He argued that since e-commerce transaction can occur across the country, it cannot be expected that a customer can proceed against the e-commerce company only where it is registered. Therefore, the Mysore Court, where the product was ordered and delivered, could exercise jurisdiction.
Snapdeal’s defence: safe harbour, due diligence under IT Act
Snapdeal said it is an intermediary with safe harbour protections under Section 79 of the Information Technology Act, and had no role in the transaction. Under the IT Act, all internet intermediaries get safe harbour, since they merely provide a platform for communications or sales and purchases without a direct role in what users or sellers and buyers do on the platform. Snapdeal contended that it was Adept Biocare, which exhibited and offered Suhagra for sale via its platform. Being an intermediary, Snapdeal and its directors could not be made liable for offences under the Drugs and Cosmetics Act.
Exercised due diligence under IT Act: A seller has to be registered with Snapdeal and contractually agree to the marketplace’s terms of use, terms of offer for sale, and seller agreements. The seller agreements were accompanied by a schedule of banned products that categorically included prescription medicines and drugs.
- Snapdeal argued that it has a system in place to inform all sellers about legal obligations and therefore exercised due diligence under Section 79 of the IT Act and Intermediaries Guidelines Rules 2011. Further, under the IT Act, Snapdeal is only required to remove third-party content only upon actual knowledge in the form of a court order or government notice.
Further, apart from the unexplained and inordinate delay of six years in filing the complaint, the magistrate failed to consider the marketplace model of e-commerce as recognized by the Indian government via Press Note 3, 2016.
Jurisdiction of the court
Snapdeal’s chief executive officer Kunal Bahl and chief operating officer Rohit Bansal do not reside within the jurisdiction of the Mysuru magistrate, which had issued summons to both, the judgement noted. The High Court noted that Snapdeal, Bahl, and Bansal have no connection to the jurisdiction of the magistrate, since they don’t have a registered office or a temporary residence. The Karnataka High Court said that the Magistrate’s Court needs to be absolutely sure that the summons are necessary to be issued, after considering that the accused lies outside the magistrate’s jurisdiction and would need to travel back and forth for the case.
The case in question is regarding the unauthorised sale of a prohibited item, and is not a cyber crime case. The sale took place online, in that the product was put up for sale on the marketplace; “anyone could have bought the same from any place so long as the product could be delivered at the place where the buyer was located”, the court said.
“A buyer could also place an order from one place and get the product delivered at another. It is for this reason that the concept of Jurisdiction of courts in e-commerce transactions gets complicated.” Karnataka High Court
Normally, a case shall be inquired and tried by a court under whose jurisdiction the offence has been committed, but this can change if the offence is carried out at multiple places or violates several acts in different local areas. When it comes to e-commerce, the court noted that:
In a prosecution for criminal offences, white collared or otherwise the accused is required to be present physically on each date of hearing, so long as such appearance is not exempted. As such the court would have to protect the accused from possible forum shopping and or from complaints being filed in multiple jurisdictions, which would cause undue harassment to such an e-commerce entity.
Eventually, the High Court ruled that a court can exercise jurisdiction in an offence relating an e-commerce transaction only if the e-commerce company has presence, in the form of a registered office, brand office, corporate office or the like, in the area falling within the court’s jurisdiction. Cyber crimes, which fall under the IT Act, are exempt from this. Cyber Crime cases can be filed in any cyber cell in India, irrespective of where the crime was originally committed.
Read the judgment here.
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