07 Jan 2121
Case : Kunal Bahl and Ors. v. State of Karnataka Criminal Petition No. 4676 of 2020 And Criminal Petition No. 4712 of 2020
Court : Karnataka High Court
Bench : Justice Suraj Govindaraj
Decided on : 07 Jan 2121
The Relevant Statutes
Section 482, 204, 202(1), 200, 156(3), 191(1)(a), 190 202(2), 181(1), 187, 186, 185, 183, 182, 180, 179, 178, 177 of the Code of Criminal Procedure, 1973
Section 27 (a)(ii), 27 (b)(ii), 18(c), 21, 18(1)(c), 34, of the Drugs and Cosmetics Act, 1940
Section 2(1)(w), 79(2)(c), 79, 79(3)(b), 2(w) of Information Technology Act, 2000
Section 405, 406, 34, 420 of the Indian Penal Code, 1860
Section 2(42) of the Companies Act, 2013
Section 2(v)(iii) of the FEMA, 1999
Information Technology (Intermediaries Guidelines) Rules, 2011
Rule 5(1) of the Consumer Protection (e-commerce) Rules, 2020
Section 19 of the Code of Criminal Procedure (Amendment) Act (Central Act 25 of 2005)
Brief Facts & Procedural History
1. Jasper Infotech Private Limited [now Snapdeal Private Limited (Petitioner)], incorporated in 2007 (hereinafter referred to as ‘Snapdeal'), launched an online marketplace in February 2010, namely “Snapdeal.com,” which claims to be India's largest online marketplace, with the widest assortment of 60 million+ products across 800 categories from regional, national, and international sources.
2. Snapdeal is an ‘intermediary,' as defined by the Information Technology Act of 2000, Section 2(1)(w). An online marketplace qualifies as an "intermediary" under the Information Technology Act of 2000.
3. The directors of the Petitioner in Crl.P.No.4712/2020 are No.4676/2020. In the Complaint, they have accused Nos. 3 and 4 respectively.
4. A seller must register an account with Snapdeal and contractually agree to the terms of the agreements to upload, sell, or simply ‘offer for sale any product.
5. Snapdeal's business is described as "a platform that allows the online sale and purchasing of branded products and services ("Services") supplied by Snapdeal's different affiliate/ registered merchants/ vendors/ service providers ("Vendor/s") in its "Terms of Offer for Sale." The Vendors are the Website's sellers of products and services who are said to be entirely liable to the purchaser/customer for the products sold or for the redemption of any Voucher acquired through the Website."
6. Snapdeal adheres to seller agreements with a variety of vendors, each of which is accompanied with a Schedule of Prohibited Products, which categorically includes "21. Prescription Drugs and Medicines.”
7. The sellers are said to have consented to numerous terms in the Seller Agreement, the relevant conditions in this case being:
8. Through the Seller Panel, the Seller will upload Product listings for the sale of Products in the relevant category. The seller must also provide all relevant information regarding the sale/purchase of the Products, such as the Selling Price, an informative description of each Product (including but not limited to the Product's length, breadth, and height), and its contents, in the form of text descriptions, graphics, pictures, or videos. These Product listings and descriptions, as well as the Selling Price, will be published on the Website.
9. On the Seller Panel/Website, the Seller has stated that the Seller would offer correct Product information. The Product description must not be deceptive and must accurately represent the Product's condition. Seller undertakes to return any monies received from the Buyer if the sold Product does not match the Product description posted on the Website.
10. Seller will not attempt to sell any items listed on the Snapdeal Banned Products” List on this Website. Snapdeal reserves the right to prohibit all such items and to suspend or terminate the Seller's access to the Seller Panel and the Website, as well as to cancel this Agreement immediately.
11. When a buyer chooses to purchase a Product through the Website, Snapdeal will only accept the order in the capacity of an online marketplace. The seller has also agreed that Snapdeal's payment facility is neither a banking nor a financial service, but rather a facilitator/facilitating the service of providing an automated online electronic payment system for transactions on the Webs, using existing authorised banking infrastructure and credit card payment gateway networks, or payment via cash on delivery. Snapdeal is also not acting as a trustee or in a fiduciary role about any transaction on the Website by offering the payment option.
12. Seller acknowledges and agrees that selling and shipping fake, duplicate, spurious, counterfeit, refurbished, or previously owned Products over the Website may jeopardise Snapdeal's image and goodwill, as well as cause injury and prejudice to Buyers. Seller acknowledges and warrants that he or she will not sell any product that might jeopardise Snapdeal's reputation or goodwill. Furthermore, if Snapdeal receives a complaint from a Buyer or if Seller sells or delivers fake, duplicate, spurious, counterfeit, refurbished, or previously owned Products through the Website, Seller will be charged an amount equal to the total GMV (Gross Merchandise Value) of all products sold through Snapdeal's Website or Rs 5,00,000, whichever is higher and will be subject to immediate deactivation. Snapdeal retains the right to deduct the sum stated above from any amounts due to Seller under this Agreement.
13. Snapdeal has also released a paper named 'Prohibited Seller Behaviours and Consequences Policy Document,' which clearly states that one of the prohibited seller activities is:
14. Based on the foregoing, it is argued that Snapdeal has put in place a comprehensive mechanism to educate all sellers on its platform of their legal duties and obligations, and has therefore fulfilled its function and obligation as an intermediary.
15. It is argued that the above documents demonstrate Snapdeal's due diligence in ensuring that Sellers who register on its Website conduct themselves by and in compliance with the applicable laws, as required by Section 79(2)(c) of the Information Technology Act, 2000, read in conjunction with the Information Technology (Intermediaries Guidelines) Rules, 2011.
16. The Complaint was submitted by the Respondent Inspector, who was appointed under Section 21 of Drugs and Cosmetics Act, 1940 (as per G.O No. HFW/ 20/ IMM/ 2010 dated 20/04/ 2010), based on information purportedly obtained by the Deputy Drugs Controller, Mysore on November 20, 2014.
17. The following are the accusations stated in the Complaint:
a. It is claimed that in October 2014, Mr Amandeep Chawla's company, M/s Adept Biocare, Plot No. 1 53, Industrial Area, Phase II, Opp. Amartex, Panchakula (Accused No. 1 in the Impugned Complaint), registered as a vendor on Accused No. 2's online marketplace www.snapdeal.com to list and sell his items.
b. It is further claimed that Accused No. 1 admitted to selling SUHAGRA-100 Tablets (Sildenafil Citrate Tablets 100 mg) between October 13, 2014, and December 16, 2014.
c. Accused No.1 was advised by Snapdeal not to sell the tablets on the website. It is also claimed that Accused No. 1 had a wholesale licence.
d. On October 1, 2014, Mr Manjunath placed an online order for SUHAGRA 100 Tablets (Sildenafil Citrate Tablets 100 mg) on the Petitioners' website under retail Invoice No. Accused No. 1 requested S9C12D/ I4-1S/ 200, which was delivered to him on November 20, 2014, with payment of Rs.390 made under Cash on Delivery (COD) in the presence of Investigations Officers and Panch witnesses.
e. Snapdeal is accused of displaying SUHAGRA-100 mg Tablets for sale and providing a platform to both the seller and the buyer.
f. The Respondent sent a letter to the Assistant Drugs Controller - 02, Belgaum Circle, on August 10, 2017, requesting certified copies of Snapdeal's Constitution and other papers.
g. Snapdeal wrote to the Assistant Drugs Controller-02, Belgaum Circle, on May 21, 2017, and provided all of the needed documentation.
h. The Deputy Drugs Controller, Mysuru, wrote emails to Snapdeal on August 22, 2017, and May 29, 2017, to see if the company's constitution information were the same as previously.
i. Snapdeal's Authorized Signatory, Krishna Mohan Chaudary, responded to the email and provided the company's Board of Directors, and the process was repeated on consecutive occasions. Snapdeal responded to the Respondent on January 15, 2020.
j. Based on the foregoing, it is alleged that a breach of Section 18(c) of Drugs and Cosmetics Act, 1940 has occurred, which is punishable under Section 27(b)(ii) of Drugs and Cosmetics Act, 1940.
k. In C.C., criminal charges have been filed against the Petitioner. Cognisance of crime under Section 27(b)(ii) is taken and Summons is issued to the Petitioners by order dated 08.06.2020.;
l. The Petitioners are before this Court seeking remedy after being aggrieved by the aforesaid Complaint and the decision of Cognisance.
m. Request for documents in C.C.No.156/2020, which is pending before the Court of the Principal Senior Civil Judge and CJM, Mysuru;
n. Quash the Complaint in C.C.No.156/2020, which is in the file of the Prl. Senior Civil Judge and CJM, Mysuru; and
o. Quash the order dated 8.6.2020, as well as the ongoing procedures in C.C.No.156/2020 before the Prl. Mysuru Senior Civil Judge and CMM taking cognizance of the offences punishable under Section 27(b)(ii) of the Drugs and Cosmetics Act, 1940 and issued summons to the petitioners.
The Issue(s) of the Case
Whether the complaint dated 5 June 2020 in C.C.No.156/2020 pending to be quashed?
The Observations of the Court/Commission
1. Honourable High Court of Karnataka at Bengaluru observed that The Cognisance Order dated 8.6.2020 does not comply with Section 191(1)(a) of the Code of Criminal Procedure, 1973 and does not indicate that the procedure under Section 204 of the Code of Criminal Procedure, 1973 has been followed. In light of the explanation above, the Court taking cognisance and issuing of the process is needed to give a sufficiently comprehensive order to support the decision to take cognisance and issue process. Ex-facie reading of the order of Cognisance should reveal the prudent application of mind to the law and circumstances of the case.
2. Honourable High Court of Karnataka at Bengaluru also observed that there would be no need for an investigation under Section 202 of the Code of Criminal Procedure, 1973 if the accused has an office, branch office, corporate office, sales office, or the like inside the Magistrate's jurisdiction where the offence has been committed and or continues to be committed. It would be necessary for the Magistrate to explain why the investigation under Section 202 of the Code of Criminal Procedure, 1973 is not being held in the order of issue of summons/process record.
3. Honourable High Court of Karnataka at Bengaluru also observed that if the accused is an individual, and the accused has a temporary abode within the Magistrate's jurisdiction, there is no need for an investigation under Section 202 of the Code of Criminal Procedure, 1973 since the accused does not have a permanent domicile. It would be necessary for the Magistrate to explain why the investigation under Section 202 of the Code of Criminal Procedure, 1973 is not being held in the order of issue of summons/process record.
4. Honourable High Court of Karnataka at Bengaluru also observed that when the accused is not present within the jurisdiction of the Magistrate where the offence was committed, an investigation under Section 202 of the Code of Criminal Procedure, 1973 is required.
5. Honourable High Court of Karnataka at Bengaluru also observed that if an accused is offended by the issuing of Summons, the accused must set out his grievance before the Magistrate Court and/or by petition under Section 482 Code of Criminal Procedure, 1973 promptly upon receipt of the Summons and/or on appearance before the Magistrate. If such a challenge is delayed or not submitted within a reasonable time, the accused will not be allowed to make the grievance that the procedure under Section 202 of the Code of Criminal Procedure, 1973 Due to delays and latches, the procedure has not been followed.
6. Honourable High Court of Karnataka at Bengaluru also observed that only a court where the accused has a presence, such as a registered office, branch office, corporate office, or the like, might have jurisdiction over an e-commerce transaction offence.
7. Honourable High Court of Karnataka at Bengaluru also observed that of course, this does not apply to cybercrime, which is subject to international jurisdiction under the Information Technology Act, 2000. This implies that, regardless of where the crime was committed, any cyber-crime complaint can be filed with any of India's cyber cells.
8. Honourable High Court of Karnataka at Bengaluru also observed that an intermediary, as defined in Section 2(w) of the Information Technology Act, or its directors/officers, would not be responsible for any conduct or inaction on the part of a vendor/seller using the intermediary's website or market place services.
9. Honourable High Court of Karnataka at Bengaluru also observed that because the necessary components of Section 18 (1)(c) of Drugs and Cosmetics Act, 1940 have not been satisfied, an intermediary would not be accountable and/or liable for any item sold on its platform that does not comply with the requirements of the Drugs and Cosmetics Act, 1949. Under Section 27(b)(ii) of the Drugs and Cosmetics Act, 1940, neither Snapdeal nor its Directors can be punished.
10. Honourable High Court of Karnataka at Bengaluru also observed that the delay is fatal to these proceedings since there is no acceptable justification for the extremely late filing of the Complaint.
The Decision Held by the Court
High Court of Karnataka at Bengaluru held that the proceedings in C.C.No.156/2020, which were ongoing before the Court of the Principal Senior Civil Judge and Chief Justice of Mysuru, have been quashed.