Intermediary entitled to claim protection u/s 79 IT Act for criminal liability unless ‘active role’ is disclosed; Delhi High Court quashes FIR against Flipkart

Delhi High Court

Delhi High Court: In a case where FIR was registered by Managing Director of Sanash Impex Pvt. Ltd. (‘respondent’) against Flipkart (‘petitioner’) for allegedly selling fake products of DC Dermacol cosmetics, Asha Menon J. quashed the FIR stating that this is one such case where the registration of an FIR against an intermediary would lead to miscarriage of justice considering the basic ingredients being met to avail protection under Section 79 of Information Technology Act, 2000.

Flipkart is an e-commerce entity that provides its portal for the sale of products to other sellers. Respondent 2, being MD of Sanash Impex Pvt. Ltd. has been authorized with absolute and exclusive right to sell DC DERMACOL cosmetic products in India, both online and offline. DC DERMACOL is a product of an international brand (Czech Brand) and gained high repute as a brand all over the world in respect of skin makeup.

The allegations are such that it is in connivance with the fake/unauthorized re-sellers. Thus, the respondent 2, on behalf of its company, accused the petitioner of cheating and illegal selling of DC DERMACOL cosmetics products. On the basis of this complaint, FIR was registered for the commission of offences under Sections 103/104 of the Trademark Act, 1999 and Section 63 of the Copyright Act, 1957.

Thus, instant petition was filed under Articles 226 and 227 of the Constitution of India read with Section 482 of Criminal Procedure Code praying for quashing of the said FIR.

Counsel for Petitioner Mr. Siddharth Luthra submitted that the petitioner was an intermediary as defined under Section 2(1) (w) of Information Technology Act, 2000 and was thus protected under Section 79 of Information Technology Act, 2000. It was further submitted that until and unless a court order was served upon the petitioner, there was no obligation on the petitioner, as an intermediary, to remove any material from its portal. It was submitted that in the present case, respondent 2 has not initiated any civil proceedings and no court order had been served upon the petitioner. As such, the FIR against the petitioner was mis-placed and mala fide.

“Intermediary” is defined under Section 2(1)(w) Information Technology Act, 2000 as follows:

Section 2(1)(w) —intermediary, with respect to any particular electronic records, means any person who on behalf of another person receives, stores or transmits that record or provides any service with respect to that record and includes telecom service providers, network service providers, internet service providers, web-hosting service providers, search engines, online payment sites, online-auction sites, online-market places and cyber cafes.

Placing reliance on Google India Private Limited v. Visaka Industries, (2020) 4 SCC 162, the Court noted that the e-market portals, like the petitioner, are intermediaries.

The Court further noted that IT Act does not provide for infringement of trademark or copyright as an offence thereunder and the only obligation of an intermediary is provided under Section 79 of IT Act which incidentally falls under Chapter XII under the title —Intermediaries Not to Be Liable in Certain Cases.

It was stated that the obligation of the intermediary is to observe due diligence and follow the guidelines that may be prescribed by the Government in this regard. Therefore, reference will have to be made to the Information Technology (Intermediary Guidelines) Rules, 2011 (‘IT Guidelines’). Rule 3(1) of IT Guidelines provides for due diligence to be observed by the intermediary, however, the non-compliance of these Guidelines/Rules have not been declared to be an “offence” under the IT Act.

The Court remarked the present matter relates to criminal liability. The simple question is whether compliance with the “due diligence” requirement under Rule 3 of IT Guidelines would render the intermediary eligible for exemption from criminal liability also.

The Court opined that the standard for fixing criminal liability is far higher than that under civil law, one requiring proof ‘beyond reasonable doubt’ and not just a ‘balance of probabilities. Thus, unless an active role is disclosed in the commission of the offences complained of, the intermediary, such as the present petitioner, would be entitled to claim protection under Section 79 of the IT Act. Thus, when compliance with the “due diligence” requirement under Rule 3 of IT Guidelines is evident, ex facie, the exclusion of liability under Section 79 of IT Act would include exclusion from criminal prosecution.

The Court observed that the petitioner has complied with the Guidelines by putting it on their Terms of Use, that the users cannot display what belongs to another person and over which they have no right or which infringes upon or violates any third party’s rights, including but not limited to intellectual property rights, rights of privacy or rights of publicity; or promotes an illegal or unauthorized copy of another person’s copyrighted work or infringes any patent, trademark, copyright, proprietary rights, third-party’s trade secrets, rights of publicity or privacy, or is fraudulent or involves the sale of counterfeit or stolen items or which violates any law for the time being in force. Thus, due diligence under Rule 3 of IT Guidelines has been complied with.

The Court also considered a moot question whether the information provided by the complainant would suffice to obligate the petitioner to take down the allegedly offending information/sites/products. It noted that the intermediaries are certainly not situated to determine the correctness of a claim by a complainant to a trademark or copyright.

The court remarked that the present case goes a step ahead as the FIR has been lodged only against the petitioner and another platform, as none of the other sites or entities, allegedly selling the products which are either fake or unauthorized, are even named.

Thus, placing reliance on State of Haryana v. Bhajan Lal, 1992 Supp (1) SCC 335, the Court quashed the FIR qua the petitioner holding that this is one such case where the registration of an FIR against an intermediary would lead to miscarriage of justice not barring investigations in order to ascertain the identity of those who are infringers and/or unauthorized sellers of the products of the Czech company.

[Flipkart Internet Pvt Ltd v. State of NCT of Delhi, 2022 SCC OnLine Del 2439, decided on 17-08-2022]


Advocates who appeared in this case :

For Petitioners- Mr. Siddharth Luthra, Senior Advocate with Mr. Dheeraj Nair, Mr. Manish K. Jha, Ms. Shruti Dass and Mr. Ayush Kaushik, Advocates;

For Respondents- Mr. Amol Sinha, ASC for R-1/ State with Mr. Anshum Jain and Mr. Rahul Kochar, Advocates and Insp. B.M. Bahuguna Mr. Vivek Raja, Advocate for R-2.


*Arunima Bose, Editorial Assistant has put this report together.

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