Delhi High Court quashes FIR against e-commerce platform for alleged sale of fake cosmetics

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The Delhi High Court on Wednesday quashed an FIR registered against an e-commerce platform for allegedly conniving with certain unauthorized sellers to sell fake cosmetic products of an international brand.

Justice Asha Menon said that the registration of an FIR against the petitioner platform, Flipkart, would lead to a miscarriage of justice while clarifying that the investigating agency was free to carry out a further probe to ascertain the identity of the unauthorized sellers of the products in question.

The FIR was registered against Flipkart in August 2020 by Delhi Police under Section 63 (Offence of infringement of copyright) of the Copyright Act and Sections 103 (Penalty for applying false trade marks, trade descriptions, etc) /104 (Penalty for selling goods or providing services to which false trade mark or false trade description is applied) of the Trade Marks Act based on a complaint made by an entity which claimed to have the absolute and exclusive right to sell the cosmetic products in India.

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The petitioner sought quashing of FIR on the ground that it was an "intermediary" and the Information Technology (IT) Act provided a "safe harbour" to it concerning liabilities arising for posting of material by third parties on their platforms.

The judge stated that unless an active role is disclosed in the commission of the offences, an e-commerce platform can claim protection as an "intermediary" under Section 79 (Exemption from liability of intermediary) of the IT Act and when compliance with the "due diligence" requirement under Rule 3 (Due diligence to be observed by an intermediary) of the IT Guidelines is evident, the exclusion of liability under Section 79 would ex facie include exclusion from criminal prosecution as well.

In the present case, the court said, the petitioner complied with the applicable guidelines by issuing the "Terms of Use" against the illegal and unauthorised sale of products.

"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 I.T. Act. In other words, the question must be answered in the affirmative that when compliance with the "due diligence" requirement under Rule 3 of the I.T. Guidelines is evident, ex facie, the exclusion of liability under Section 79 of the I.T. Act would include exclusion from criminal prosecution," said the court.

"This is one such case where the registration of an FIR against an intermediary would lead to miscarriage of justice. Therefore, this Court finds itself justified in allowing the present petition and quashing the FIR qua the petitioner," the court added.

The court upheld the petitioner's contention that the obligation to take down the offending material from a platform arises only after a court order, and remarked,

"If a complaint, per se, was sufficient to take down the infringing material, etc., the havoc that can be caused to e-commerce is beyond imagination".

The court noted that in the present case, the FIR was lodged only against the petitioner and another platform and none of the other sites allegedly selling the alleged fake products were even named.

It added that without determining the rights of those other sites to sell the products, prima facie, the petitioner cannot be said to have committed any offence and the non-compliance with IT guidelines or rules has not been declared to be an offence under the IT Act.