Delhi High Court - Orders
Modicare Limited vs Amazon Seller Services Private Limited ... on 5 February, 2019
Author: Prathiba M. Singh
Bench: Prathiba M. Singh
$~22
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ CS(OS) 75/2019
MODICARE LIMITED ..... Plaintiff
Through: Mr. Amit Sibal, Senior Advocate with
Mr. Aman Singhal, Ms. Pooja Dodd,
Ms. Aditi Menon and Mr. Vinay
Tripathi, Advocates. (M:9811045646)
versus
AMAZON SELLER SERVICES PRIVATE LIMITED
& ORS. ..... Defendants
Through: Mr. Saikrishna Rajagopal, Mr.
Sidharth Chopra, Ms. Gitanjali
Mathew, Mr. Devvrat Joshi, Ms.
Nilofar Absar and Ms. Abhii V.,
Advocates for D-1. (M:9810621272)
CORAM:
JUSTICE PRATHIBA M. SINGH
ORDER
% 05.02.2019 I.A. 1734/2019 (exemption)
1. This is an application seeking exemption from filing original documents. Recording the Plaintiff's undertaking that the inspection of original documents shall be given, if demanded, or that the original documents shall be filed prior to the stage of admission/denial, the exemption is allowed. I.A. is disposed of.
CS(OS) 75/2019
2. Let the plaint be registered as a suit.
3. Issue summons to the Defendants through all modes upon filing of Process Fee including through email.
4. Mr. Saikrishna Rajagopal, Ld. counsel for Defendant No.1 - Amazon CS(OS) 75/2019 Page 1 of 9 Seller Services Pvt. Ltd. (hereinafter, „Amazon‟), has entered appearance and accepts notice on behalf of Defendant No.1. Let the written statement be filed by Defendant No.1 positively within 30 days. The summons to Defendant Nos.2 and 3 shall indicate that a written statement to the plaint shall be positively filed within 30 days from date of receipt of summons.
5. Along with the written statement, the Defendants shall also file an affidavit of admission/denial of the documents of the Plaintiff, without which the written statement shall not be taken on record.
6. Liberty is given to the Plaintiff to file a replication within 15 days of the receipt of the written statement. Along with the replication, if any, filed by the Plaintiff, an affidavit of admission/denial of documents of the Defendants, be filed by the Plaintiff, without which the replication shall not be taken on record. If any of the parties wish to seek inspection of any documents, the same shall be sought and given within the timelines prescribed under the Delhi High Court (Original Side) Rules, 2018.
7. List before the Joint Registrar for marking of exhibits on 23rd April, 2019. It is made clear that any party unjustifiably denying documents would be liable to be burdened with costs.
8. List before Court on 5th March, 2019.
I.A. 1733/2019 (u/O XXXIX Rules 1 & 2 CPC)
9. The present suit has been filed by M/s. Modicare Limited (hereinafter, „Plaintiff‟) seeking permanent and mandatory injunction restraining the Defendants from committing illegal and tortious acts, from indulging in unfair competition, disclosure, damages and other appropriate relief. The case of the Plaintiff is that it is a manufacturer and seller of various health and nutrition, skin care, cosmetics, personal care, home care, CS(OS) 75/2019 Page 2 of 9 food, beverage and agricultural products, which are sold through its direct sellers. It is the case of the Plaintiff that various consultants are engaged by the Plaintiff who are given a percentage of the income on the basis of the sales achieved by them. The entire product range of the Plaintiff is sold from door-to-door through a network of consultants, dealers and distributors, directly to consumers. The products of the Plaintiff are not sold through any brick and mortar stores and are regulated by the Direct Selling Guidelines which are issued by the Department of Consumer Affairs, Ministry of Consumer Affairs, Food and Public Distribution, vide notification dated 26th October, 2016.
10. It is submitted by learned Senior counsel for the Plaintiff that Defendant No.1 - Amazon, operates the e-commerce portal www.amazon.in wherein the products of the Plaintiff are being offered for sale and sold. Two of the sellers, as per the portal are Defendant No.2 - M/s. Laxmi Enterprises, and one Defendant No.3 - M/s. Modicare DP Store. According to learned Senior counsel for the Plaintiff, the manner in which the products are sold on the Amazon portal shows that the same is not only violative of the Direct Selling Guidelines which the Plaintiff and its Consultants/distributors are bound by, but there is also serious mis-representation on the website, as there is an attempt to show that the products in fact are being offered for sale by the Plaintiff itself. The features of the Amazon website over which the Plaintiff has a grievance include the following: -
(i) Products are shown as being "by Modicare";
(ii) The Maximum Retail Price (hereinafter, „MRP‟) of the products is first scaled up and then reduced to the actual MRP, which is in violation of the Legal Metrology Act, 2009 and the Legal CS(OS) 75/2019 Page 3 of 9 Metrology (Packaged Commodity) Rules, 2011 as amended by Legal Metrology (Packaged Commodities) Amendment Rules, 2017.
(iii) There are various defects which have been pointed out by the consumers in their comments on the Amazon portal, which show that the Plaintiff's products are being severely tarnished due to the mis-handling of the products and unauthorized sale of the products, through channels which are not trained to distribute these products.
(iv) The warranties for the products are being changed, inasmuch as the Plaintiff gives warranties even after consumption upto 25%.
However, the Amazon portal advertises that the product is non- returnable after sale.
(v) The source of the products is also not clear inasmuch as the Plaintiff is unable to specifically vouch for the authenticity of the products.
(vi) The use of the name M/s. Modicare DP Store on the Amazon portal, whose address and details are not clear, also leads the Plaintiff to apprehension that the name Modicare Limited is being misused on the Amazon platform.
11. It is submitted that in view of these various features, notices were issued to Amazon which were replied to on 13th January, 2017. In the said reply, the stand of Amazon is simply that it is an "intermediary" under the Information Technology Act, 2000 (hereinafter „IT Act‟).
12. Under these circumstances and placing reliance on similar orders that have been passed by this Court by various learned Single Judges, in similar CS(OS) 75/2019 Page 4 of 9 matters, learned Senior counsel for the Plaintiff presses for an ad-interim injunction.
13. On the other hand, Mr. Saikrishna Rajagopal, learned counsel who has entered appearance for Defendant No.1, after noticing the matter in the cause list, has submitted that the first and foremost reason why an ad-interim order ought not to be passed, is that the Plaintiff had knowledge of Modicare Products being sold on the Amazon platform since 2016. He relies on the correspondence placed on record to argue that this is not a fit case for an ad- interim injunction. It is further submitted that the Plaintiff has not sued for infringement of trademarks under the Trademark Act, 1999 and hence the claim of the Plaintiff lacks any statutory backing. It is further submitted that firstly Amazon is an intermediary as defined under the IT Act and in any event, even if Amazon is handling the packaging, transportation and delivery of the goods, the safe harbour provisions under Section 79 of the IT Act continues to apply to Amazon.
14. After hearing learned counsels for the parties, at the prima facie stage, the first objection of the Defendant No.1 i.e. that the notice was issued in 2016 is not a sufficient ground to not consider passing of an ad-interim order, inasmuch as, every sale constitutes a new cause of action and when the products are being sold and advertised on the Amazon platform continuously, there is a continuing cause.
15. The letter dated 9th April, 2018 written by Food Safety and Standards Authority of India (FSSAI) which is the authority dealing with food and other related goods is clear and reads as under: -
"To The CEOs CS(OS) 75/2019 Page 5 of 9 Flipkart/Amazon/Snapdeal/Shopclues Sub: Violation of Direct Selling Guideliens, 2016 issued by the Department of Consumer Affairs-reg.
Sir/Madam, Indian Direct Selling Association (IDSA) has brought to the notice of FSSAI the sale of health supplements and food items produced by the Direct Selling Entities being sold on e-commerce portals without their prior written consent. In this regard, IDSA has drawn attention to the Model Guidelines on Direct Selling, 2016 issued by the Department of Consumer Affairs (DCA) under Ministry of Consumer Affairs, Food and Public Distribution wherein Clause 7(6) (Conduct for the Protection of Consumer) of the said Guidelines specifically stipulates that "any person who sell or offers for sale, including on an e-commerce platform/market place, any product or service of a Direct Selling Entity must have prior written consent from the respective Direct Selling Entity in order to undertake or solicit such sale of offer".
2. In view of the above, any e-commerce sale of a DSE product has to have their prior written consent. In the interest of maintaining the food safety chain, e- commerce entities may ensure that the products of DSEs sold or offered through their e-portals have prior written consent of concerned DSEs as per the guidelines of DCA."
16. As per this letter, Amazon along with other e-commerce platforms have already been told that products which are available only through direct selling networks ought not to be sold on e-commerce platforms.
17. Though, Mr. Saikrishna Rajagopal, has raised a legal objection as to the source of the power for passing of the Direct Selling Guidelines, at the CS(OS) 75/2019 Page 6 of 9 prima facie stage, the Direct Selling Guidelines, which have been operational for the last few years, under which the Plaintiff and other similar direct selling companies are conducting business, cannot be given a go-by. The Direct Selling Guidelines are clear that no company can offer for sale or sell the products which are sold by direct selling, on e-commerce platforms without the prior written consent of the Direct Selling Entities. Sub-clause 6 of clause 7 of the direct selling guidelines which regulate the conduct of the Direct Selling Entities and have been passed in the interest of consumers is set out below: -
"6. Any person who sells or offers for sale, including on an e-commerce platform/marketplace, any product or service of a Direct Selling Entity must have prior written consent from the respective Direct Selling Entity in order to undertake or solicit such sale or offer."
18. A perusal of the various printouts from the Amazon website also show that the MRP in the case of one of the products, which has a MRP of Rs.500/-, the same is shown with MRP of Rs.699/- and has, thereafter, been scaled down to Rs.500/-. Further the warranty is also on a non-returnable basis, whereas the warranty for the Plaintiff's products is that every product can be returned or exchanged if the consumer is not satisfied. The various consumer reviews on the Amazon platform, which have also been placed on record, point towards a situation wherein the products of the Plaintiff are being shown and sold through various sellers on the Amazon platform. Moreover, despite being put to notice and details of the sellers having been sought, the same have not been provided by Amazon. It is submitted that the details of one of the sellers is available in the invoice placed on record. That CS(OS) 75/2019 Page 7 of 9 may not be sufficient. An e-commerce platform, which claims to be an intermediary, ought not to have any hesitation in providing the details of the sellers to the Plaintiff so that the Plaintiff can ascertain as to the genuinity of the sellers and the source of the Plaintiff's products with these sellers.
19. The question as to the role that Amazon is playing in these sales is to be determined after pleadings are completed. For the time being, the Plaintiff has made out a prima facie case for grant of ad-interim protection. Accordingly, the following interim directions are issued:
(i) Defendant Nos.2 and 3, who are sellers on the Amazon platform, are restrained from selling, advertising, offering for sale or displaying Modicare products on www.amazon.in platform or Amazon mobile app. Their products shall be taken down with immediate effect, and at least within 48 hours from today.
(ii) Samples of products sold by defendant nos 2 and 3 shall be supplied to counsels for the Plaintiff, who will file a report on the genuinity of the said products and whether the said products originate from M/s.Modicare.
(iii) Insofar as other the sellers, who may be advertising Modicare products on the Amazon platforms are concerned, a complete list of sellers along with their contact details viz., address, emails, phone numbers etc., shall be furnished by the counsels for Amazon to the counsels for the Plaintiff, who will then seek instructions as to whether any of the said sellers are actual and genuine distributors of the Plaintiff. The lists so exchanged shall be placed on record.
(iv) If the Plaintiff finds that the said parties are not actual distributors, it can notify Amazon and requisite steps shall be taken by Amazon within four weeks, to ascertain the source of the Modicare products with the sellers who CS(OS) 75/2019 Page 8 of 9 are not direct distributors of Modicare. If the said sellers are unable to provide the details of the source of the products, upon intimation being given by the Plaintiff, the listings of Modicare products shall be taken down.
20. Amazon is directed to file a reply to the application under Order XXXIX Rules 1 and 2 CPC within 10 days. Rejoinder before the next date. Both parties are given liberty to approach the Court for any modification of this order. Questions as to the legality and validity of Direct Selling Guidelines and their applicability on e-commerce portals, like Amazon, would be considered after the reply is filed.
21. Reply to the application be filed within 10 days, by Defendant Nos.2 and 3, from service of the present order along with the complete paper book. List the application before Court on 5th March, 2019 for hearing.
22. Dasti.
PRATHIBA M. SINGH, J.
FEBRUARY 05, 2019 Rekha CS(OS) 75/2019 Page 9 of 9