Karnataka High Court
Flipkart Internet Private Limited vs M/S. Indusviva Health Sciences Pvt Ltd on 29 July, 2022
Author: S.R.Krishna Kumar
Bench: S.R.Krishna Kumar
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 29TH DAY OF JULY, 2022
BEFORE
THE HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR
M.F.A.No. 1693 OF 2021(CPC)
BETWEEN:
FLIPKART INTERNET PRIVATE LIMITED
HAVING ITS REGISTRED OFFICE AT
BUILDING ALYSSA, BEGONIA & CLOVES EMBASSY TECH VILLAGE
OUTER RING ROAD, DEVARABEESANAHALLI VILLAGE
BENGALURU - 560 013
REPRESENTED BY ITS
AUTHORIZED SIGNATORY MRS. SHEETAL TIWARI.
...APPELLANT
(BY SRI. DHYAN CHINNAPPA, SR.COUNSEL APPEARING FOR
SRI. PRASANTH.V.G., , ADVOCATE)
AND
M/S. INDUSVIVA HEALTH SCIENCES PVT.LTD.,
HAVING ITS REGISTERED OFFICE AT
VIVA TOWER NO. 36 ,V.P.DEENANDAYAL ROAD
JAYAMAHAL EXTENSION
BENGALURU - 560 046.
REPRESENTED BY ITS
LEGAL MANAGER & AUTHORISED SIGNATORY
SRI RASOOL KHAN.
...RESPONDENT
(BY SRI. MOHAMMED MUJASSIM., ADVOCATE FOR C/R)
THIS APPEAL IS FILED UNDER ORDER 43 RULE 1(r) OF CPC.,
AGAINST THE ORDER DATED: 25.01.2021, PASSED ON I.A.NO. 1, IN
O.S.NO. 4204/2020, ON THE FILE OF THE XVIII ADDITIONAL CITY CIVIL
JUDGE, BENGALURU CITY (CCH-10), ALLOWING THE I.A.NO.1, FILED U/O
39 RULE 1 AND 2 R/W SECTION 151 OF CPC.
THIS APPEAL COMING ON FOR DICTATING JUDGMENT THIS DAY,
THE COURT DELIVERED THE FOLLOWING:
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JUDGMENT
This appeal by the appellant-defendant in O.S.4202/2020 on the file of the XVIII Additional City Civil and Sessions Judge, Bangalore (for short, the 'trial court') is directed against the impugned order dated 25.01.2021 passed on I.A.No.1 filed by the respondent-plaintiff, whereby the trial court passed an order of temporary injunction restraining the appellant-defendant, its sister concerns, agents, representatives, correspondents, officers, employees or any other person, entity, in print or electronic media or via internet or otherwise in any manner from soliciting / advertising / exhibiting/ offering/ endorsing for sale or trade or resale of present or future products of plaintiff - company till disposal of the suit.
2. The material on record discloses that the respondent-plaintiff instituted the aforesaid suit for permanent injunction restraining the appellant-defendant, its sister concerns, agents, representatives, correspondents, officers, employees or any other person, entity, in print or electronic 3 media or via internet or otherwise in any manner from soliciting / advertising / exhibiting / offering / endorsing for sale or trade or resale of present or future products of plaintiff company. Along with the suit, plaintiff filed I.A.No.1 seeking identical relief's by way of temporary injunction against the defendant. It was contended that plaintiff is a private limited company / Direct Selling Entity(DSE) carrying on business in direct selling of health and wellness products manufactured by respective manufacturers after complying with all statutory requirements. The plaintiff has obtained registration of trade marks and is carrying on business inconsonance with the Direct Selling Guidelines (DSG) issued by the Central Government, which have been ratified by State Governments including the State of Karnataka. The defendant which is a e- commerce platform is engaged in soliciting / advertising / exhibiting / offering / endorsing for sale of products of the plaintiff-company without written or oral consent of the plaintiff, which is contrary to the DSG as well as statutory laws and Rules and the defendant has thereby enriched itself 4 at the cost of the plaintiff. It is contended that since the repeated demands made by plaintiff to the defendant including issuance of a legal notice dated 09.07.2020 were not complied with by the defendant, plaintiff instituted the instant suit.
3. The defendant is contesting the aforesaid suit and has filed its written statement, objections, documents etc., inter-alia contending that the defendant is only a intermediary and is statutorily protected under Section 79 of the Information Technology Act, 2000 (for short, 'the I.T. Act') and the suit was not maintainable. It is contended that the DSG relied upon by the plaintiff are neither 'law' nor have the 'force of law; and they are merely advisory in nature and no reliance can be placed upon the same by the plaintiff. The defendant is not a seller within the meaning of Clause 7(6) of the DSG and the actual sellers / infringers as alleged by the plaintiff are both proper and necessary parties to the suit, which is liable to be dismissed for non-joinder of the said parties. The defendant has also exercised due diligence as 5 required under Section 79 of the I.T.Act as well as Rule 3 of the Information Technology (Intermediary Guidelines) Rules, 2011(for short, 'the I.T. Rules 2011') and in view of the said compliance, defendant is entitled to the protection granted under the safe harbour provisions of Section 79 of the I.T. Act. The defendant has also denied and disputed all the allegations and claims made by the plaintiff and sought for dismissal of I.A.No.1 and the suit.
4. After hearing both sides, the trial court proceeded to pass the impugned order allowing I.A.No.1, aggrieved by which, defendant is before this Court by way of the present appeal.
5. Heard Sri. Dhyan Chinnappa, learned Senior Counsel along with Sri. Prashant V.G, learned counsel for the appellant. I have also heard Sri. Gurudas Kannur, learned Senior Counsel along with Sri.Mohammed Mujassim, learned counsel for the respondent.
6. In addition to reiterating the various contentions urged in the appeal and referring to the material on record, 6 learned Senior Counsel for the appellant submits that the impugned order passed by the trial court is contrary not only to the material on record but also well settled principles of law and statutory provisions, rules etc., governing intermediaries and as such, the impugned order deserves to be set aside. In support of his contentions, learned Senior Counsel places reliance upon the following decisions:-
(i) Shreya Singhal vs. Union of India -
(2015) 5 SCC 1;
(ii) Google India Private Limited vs. Visaka Industries- (2020) 4 SCC 162;
(iii) Facebook Inc. vs. Sharmila Mandre and Ors- MFA 796/2021 dated 17.02.2021;
(iv) Kunal Bahl vs. State of Karnataka- Crl.
P. 4676/2021 dated 07.01.2021;
(v) Amazon Seller Services Private limited Vs. Amway India Enterprises Private Limited and Ors - 2020 SCC Online Del 454;
(vi) Facebook Inc. vs. Surinder Malik and Ors- 2019 SCC online Del 9887;
(vii) Kent RO systems Ltd. Vs. Amit Kotak-
2017 SCC online Del 7201;
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(viii) Ms.X vs. State and Ors - WP(Crl) 1080/2020 ( Delhi High Court)
1) Dr. Chegudi Ashok Babu vs. Karunakar Suggunna - 2019 SCC online AP 109
2) Tips Industries Limited vs. Glance digital experience Private Limited - CS(Com) 561/2020 ( Delhi High Court )
3) Sasikala Pushpa vs. FAcebook India-
CS(OS) 510/2016
4) Sharat Babu Digumarti vs. Govt. of NCT of Delhi- Crl Appeal 1222/2016 dated 14.12.2016 ( Supreme Court)
7. Per contra, in addition to reiterating the contentions urged in the objections, learned Senior counsel for the respondent would support the impugned order and submits that there is no merit in the appeal and that the same is liable to be dismissed. In support of his contentions, learned Senior Counsel places reliance upon the following decisions:-
(i) MySpace Inc vs. Super Cassettes Industries Limited - 2016 SCC online Del 6382;
(ii) Christian Louboutin Sas vs. Nakul Bajaj- 2018 SCC online Del 12215;
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(iii) Amazon Seller Services Private Limited vs. Indusviva Health Services Private Limited - MFA No. 8411/2018 dated 28.08.2019;
(iv) Amazon Seller Services Private Limited vs. Amway India Enterprise Private Limited - 2020 SCC online Del 454; AND
(v) Kunal Bahl vs. State of Karnataka - - Crl. P. 4676/2021 dated 07.01.2021.
8. After having given my anxious consideration to the rival submissions, in my considered opinion, the impugned order passed by the trial court deserves to be set aside for the following reasons:-
(i) The appellant is only an e-commerce intermediary within the meaning of 'intermediary' as defined under Section 2(1)(w) of the I.T.Act and it merely / only provides an online platform for third parties to sell / conduct sale and purchase of products and does not directly sell any product; appellant does not undertake manufacture, sale, production, storage or delivery of goods and is not liable for actions of third parties who purportedly infringed the respondent's rights.9
(ii) Section 79 of the I.T.Act contains a safe harbour provision exempting intermediaries from actions of third parties and the appellant being an intermediary, is eligible to exemption from liability of third-party actions including the suit filed by the respondent.
Section 79 of the Information Technology Act reads as under:-
79. Exemption from liability of intermediaries in certain cases:
(1) Notwithstanding anything contained in any law for the time being in force but subject to the provisions of sub-sections (2) and (3), an intermediary shall not be liable for any third party information, data or communication link made available or hosted by him. (2) The provisions of sub-section (1) shall apply if-
(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; or
(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;10
(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.
(3) The provisions of sub-section (1) shall not apply if-
(a) the intermediary has conspired or abetted or aided or induced, whether by threats or promise or otherwise in the commission of the unlawful act;
(b) upon receiving actual knowledge, or on being notified by the appropriate Government or its agency that any information, data or communication link residing in or connected to a computer resource, controlled by the intermediary is being used to commit the unlawful act, the intermediary fails to expeditiously remove or disable access to that material on that resource without vitiating the evidence in any manner.
(iii) In terms of Section 79(2)(a) of the I.T.Act, the intermediary is entitled to exemption, if its function is limited to providing access to a communication system, over which information is made available by third parties is transmitted or temporarily stored / hosted. In the instant case, the appellant only provides limited function of providing access to an online 11 system, over which information is made available by third party sellers and buyers.
(iv) Section 79(2)(b) of the I.T. Act provides that an intermediary will be entitled to protection, if it does not initiate the transmission, select receiver of the transmission or modify the information in the transmission. In the instant case, the material on record discloses that the appellant does not create the product listing and therefore, does not initiate the transmission; appellant does not select which buyer should purchase what product and hence, it does not select a receiver of the transmission; appellant also does not select or modify the content of the listing, as the details in the product listing is given by the sellers and hence, it does not modify the information contained in the transmission. It is therefore clear that the appellant is eligible and entitled to the exemption available under Section 79(1) of the I.T.Act and the claim of the plaintiff against the appellant is liable to be rejected.
(v) It is relevant to state that in Shreya Singhal's case supra, the Apex Court held as under:-12
"122. Section 97(3)(b) has to be read down that the intermediary upon receiving actual knowledge that a court order has been passed asking it to expeditiously remove or disable access to certain material must then fail to expeditiously remove or disable access to that material. This is for the reason that otherwise it would be very difficult for intermediaries like Google, Facebook, etc., to act when millions of requests are made and the intermediary is then to judge as to which of such requests are legitimate and which are not. We have been informed in that in other countries worldwide this view has gained acceptance, Argentina being in the forefront. Also, the Court order and/or the notification by the appropriate Government or its agency must strictly conform to the subject matters laid down in Article 19(2). Unlawful acts beyond what is laid down in Article 19(2) obviously cannot form any part of Section 79. With these two caveats, we refrain from striking down Section 79(3)(b).
123. The learned Additional Solicitor General informed us that it is a common practice worlwide for intermediaries to have user agreements containing what is stated in Rule 3(2). However, Rule3(4) needs to be read down in the same manner as Section 79(3)(b). The knowledge spoken of in the said sub- rule must only be through the medium of a court 13 order. Subject to this, the Information Technology ( Intermediaries Guidelines) Rules, 2011 are vaild.
124. In conclusion, we may summarise what has been held by us above:
124.1. Section 66-A of the Information Technology Act, 2000 is struck down in its entirely being violative of Article 19(1)(a) and not saved under Article 19(2).
124.2. Section 69-A and the Information Technology (Procedure and Safeguards for Blocking for Access of Information by Public) Rules, 2009 are constitutionally valid.
124.3. Section 79 is valid subject to Section 79(3)(b) being read down to mean that an intermediary upon receiving actual knowledge from a court order or on being notified by the appropriate Government or its agency that unlawful acts relatable to Article 19(2) are going to be committed then fails to expeditiously remove or disable access to such material. Similarly, the Information Technology (Intermediary Guidelines) Rules, 2011 are valid subject to Rule 3 sub-rule (4) being read down in the same manner as indicated in the judgement."
The legal position enunciated in the aforesaid judgment has been followed and reiterated by the Apex Court in its 14 subsequent judgments including the cases of Google India (supra) and Sharat Babu Digumarti (supra).
(vi) Section 79(2)(c) of the I.T.Act further states that an intermediary should observe due diligence while discharging its duties. It is relevant to state that recently, the I.T.Rules 2021 have also come into force and the requirement of due diligence is provided in the same also. As provided in the I.T. Rules 2011 and the law laid down by the Apex Court in Shreya Singhal's case supra as well as the decision of the Division Bench of the Delhi High Court in Amazon's case supra, the obligation imposed on an intermediary is to exercise due diligence, which includes publishing rules and regulations, privacy policy and user agreement which informs the users not to host, display, upload, modify, publish, transmit, update or share information, which inter-alia, violates any law for the time being in force and that the said obligation of the intermediary is to publish its policies for the information and convenience of its users in terms of the Rules. In the instant case, appellant posts terms of use and 15 privacy policies notifying users not to publish information, details etc., in which they do not have rights and there is no obligation under the I.T.Act or the Rules or any other statutory provision, which mandates the appellant to keep content of users on its own to ascertain infringement and consequently, in the facts of the instant case, since the appellant is in compliance with Section 79(2) of the I.T.Act, it is exempted from actions of third parties.
(vii) The material on record also indicates that the appellant displays the terms of use for all its users and sellers and informs them not to sell products, in which they do not have rights and that the terms of use of the appellant are available on the online platform for all users and is easily accessible. Rule-3 does not cast an obligation on the appellant to monitor the activity of every user or seller on its own and take down content on its own. As held by the Delhi High Court in Kent RO's case supra, the I.T.Rules only require intermediaries to publish rules and regulations and privacy policy to inform the users of its computer resources 16 not to host, display uphold or publish any information that infringes intellectual property right and there is no obligation on an intermediary to on its own screen all information being hosted on its portal for infringement of intellectual property rights since the same will amount to converting such intermediary into an adjudicatory body. In this context, the trial court has wrongly interpreted Rule-3 to hold that the appellant should adhere to the intellectual property rights of the respondent without appreciating that there was neither pleadings nor evidence in this regard and this has resulted in erroneous conclusion.
(viii) Section 79(3)(a) of the I.T.Act provides that if an intermediary conspires, abets or aids or induces in the commission of an unlawful act, then it will not be entitled to exemption from liability. In the instant case, respondent has failed to establish that the appellant has either conspired, abetted, aided or induced any one let alone a third party seller in commission of an unlawful offence. 17
(ix) Section of 79(3)(b) of the I.T.Act provides that an intermediary, who does not remove or disable access to the material, which is being used to commit unlawful act, despite being brought to its actual notice or through a government agency, will not be entitled to exemption from actions of third parties. In Shreya Singhal's case supra, which is followed by the Delhi High Court in Facebook's case supra, it is held that 'actual knowledge' under Section 79(3)(b) means that an intermediary such as the appellant ought to be notified through a court order or government agency for removal of objectionable content and till the appellant is notified, no action would lie against the appellant who would be entitled to exemption. Undisputedly, prior to the suit, there was no such court order or intimation from a government agency which was given by the respondent under Section 79(3)(b) to the appellant, for it to remove any content and on this score also, the impugned order deserves to be set aside.
(x) It is also significant to note that the law for removal of unlawful content as provided in Shreya Singhal's case 18 supra, is now codified by introduction of the I.T.Rules 2021. Rule 3(d) provides that removal of content can only be upon receipt of a court order or a notification by a government agency. In view of the I.T.Rules 2021 also, the impugned order cannot be sustained.
(xi) As held by the Apex Court and other High Court and this Court, owing to the special and unique characteristics of the medium of the Internet, intermediaries are not in a position to know about the content that is posted on its platforms by itself and therefore, it is for this reason that the principle of strict liability cannot be made applicable to internet intermediaries such as the appellant. In Kunal Bahl's case supra, this Court held that an 'intermediary' as defined under Section 2(w) of the I.T.Act or its directors / officers would not be liable for any action or inaction on part of a vendor / seller making use of the facilities provided by the intermediary in terms of a website or market place.
(xii) It is an undisputed fact that the actual alleged infringers or sellers of the respondent's products were not 19 made parties to the suit. It is not contended by the respondent that the appellant is the seller of its products/goods; on the other hand, respondent has categorically admits and alleges that its goods/products are being sold by third parties on the appellant's e-commerce platform, thereby making it incumbent upon the respondent to make the alleged third party sellers as parties to the suit, failing which, the suit was not maintainable for non-joinder of proper and necessary parties. The trial court also failed to appreciate that it is not the appellant - Flipkart who manufactured or sold the respondent's products on its platform and since it was only the third party sellers, who undertook such alleged transactions and any relief restraining sale of the respondent's products could only have been granted against such sellers and not against the appellant and on this ground also, the impugned order deserves to be set aside.
(xiii) The trial court has proceeded to pass the impugned order injuncting the appellant by placing reliance 20 upon Clause 7(6) of the DSGs, which provide that any person who sells or offers for sale any product or service of a directing selling entity on any commerce platform must have prior written consent from the respective direct selling entity in order to undertake or sell such an offer. Clause 7(6) of the DSGs is reproduced below:-
"7(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."
(xiv) At the outset, it is necessary to state that the trial court also failed to appreciate that the DSGs are not law and merely advisory in nature till they are adopted by the respective State Governments as held by the Division Bench of the Delhi High Court in Amazon's case supra; in the instant case, it is an undisputed fact that State of Karnataka had not adopted the DSGs as on the date of the impugned order and consequently, the trial court clearly erred in placing 21 reliance upon Clause 7(6) of the DSGs to uphold the claim of the respondent.
(xv) A bare reading of clause 7(6) of the DSGs makes it clear that it is the responsibility of the person, who is selling the product on the e-commerce platform to have written approval from the direct selling entity (respondent).The appellant neither sells nor offers for sale any goods/products on its platform, Flipkart and the appellant is merely an intermediary simpliciter to whom Clause 7(6) is not applicable. All sellers who either sell or offer for sale products on the Flipkart platform are independent parties, who register on Flipkart platform and thereafter, sell or offer for sale their products.
(xvi) The trial court also failed to appreciate that the appellant is a company that facilitates sale and purchase of products by third party sellers or buyers by providing an online e-commerce platform. Its services are similar to a shopping mall, wherein different shops simply avail the infrastructure of the shopping mall to sell products and hence 22 the liability for the product remains with the shopkeeper itself, and not the mall. It is not the appellant who undertakes sale or offers for sale any products. Descriptions of the products which are listed or offered for sale on the appellant's platform by third party sellers are provided by the seller itself. The price of the product is also determined by the sellers themselves. Once the product is sold, the invoice is generated and issued by the seller and not by the appellant. Hence, all transactions occur between sellers and buyers themselves. It is therefore clear that it is not the appellant, who either offers for sale or sells the product on its platform, Flipkart. Under these circumstances, since the appellant does not sell or offer for sale any goods/products, Rule 7(6) cannot be made applicable to the appellant and consequently, no enforcement of Rule 7(6) can be sought against the appellant and the same could not have been made the basis by the trial court to pass an order of temporary injunction against the appellant.
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(xvii) The trial court clearly erred in traversing well beyond the pleadings and documents of the parties to come to the conclusion that the appellant had infringed the trademarks of the respondent. This finding of the trial court is palpably wrong and contrary to law as well as the material on record and deserves to be set aside.
(xviii) The trial court also erred in placing reliance upon a judgment of the co-ordinate Bench of this Court in the case of Amazon Seller Services Pvt. Ltd., vs. M/s. Indusviva Health Sciences Pvt Ltd - MFA No.8411/2018 dated 28.09.2019, without appreciating that the factual matrix obtaining in the said case was different from the facts of the present case and consequently, the same was inapplicable to the case on hand and failure on the part of the court below to appreciate this, has resulted in erroneous conclusion.
9. The aforesaid facts and circumstances clearly establish that the trial court committed a grave and serious error of law, fact and jurisdiction in allowing I.A.No.1 filed by 24 the respondent - plaintiff, thereby passing an order of temporary injunction against the appellant - defendant.
10. It is also relevant to state that on 02.06.2021, this Court passed the following interim order:-
" Re-list on 30.06.2021 with an understanding that the matter would be taken up for final disposal on that day.ORDER ON I.A.No.1/2021
Pending disposal of the appeal, the impugned order dated 25.01.2021 passed in O.S.No.4204/2020 by the XVIII Addl. City Civil & Sessions Judge, Bengaluru City, is hereby stayed subject to the following interim arrangement which shall remain in force during the pendency of this appeal. I.A.No.1/2021 stands allowed accordingly.
"Pending disposal of the appeal, respondent- plaintiff is reserved liberty to file a memo before the trial court indicating the URLs / content to be taken down / removed by the appellant-defendant.
Immediately upon the memo being filed by the respondent-plaintiff before the trial court, the trial court shall forthwith pass necessary orders directing the appellant-defendant to take down / remove the specific 25 URLs / content as mentioned / stated in the memo filed by the respondent - plaintiff.
Upon the trial court passing an order pursuant to the aforesaid memo filed by the respondent - plaintiff, the appellant - defendant shall take down / remove the URLs / content as directed by the Court within a period of 36 hours".
Since the aforesaid interim order was in force during the pendency of the present appeal, it would be just and appropriate to continue the said interim order during the pendency of the suit before the trial court.
11. In the result, I pass the following:-
ORDER
(i) Appeal is hereby allowed.
(ii) The impugned order dated 25.01.2021 passed in O.S.No.4204/2020 by the XVIII Addl.City Civil and Sessions Judge, Bengaluru, is hereby set aside and I.A.No.1 filed by the respondent - plaintiff against the appellant - defendant is hereby dismissed.
(iii) The aforesaid interim order dated 02.06.2021 passed by this Court in the present appeal shall continue to 26 remain in force during the pendency of the suit before the trial court.
(iv) Liberty is reserved in favour of the respondent to request the appellant in the trial court to furnish / provide such information / particulars as regards third parties / actual sellers and upon the appellant furnishing the same, respondent-
plaintiff would be entitled to seek impleadment of the said persons as additional defendants to the suit.
(v) Liberty is also reserved in favour of the parties to file additional applications, affidavits, memos, documents etc., before the trial court which shall consider and pass appropriate orders on the same in accordance with law.
(vi) The trial court is directed to dispose of the suit in accordance with law as expeditiously as possible.
Sd/-
JUDGE Srl.