Online Marketplaces Exempted From Liability U/S 79 IT Act: Allahabad HC Grants Relief To Flipkart In Product Discrepancy Case

Taking into account the mandate of Section 79 of the IT Act, 2000, the Allahabad High Court recently granted relief to online Marketplace Flipkart in connection with a case wherein a laptop with a different company processor was delivered to the customer by the seller listed on the Flipkart.

For context, Section 79 of the IT Act, 2000 exempts the liability of intermediaries (like online marketplaces such as Flipkart) in certain cases. The provision states that an intermediary shall not be liable for any third-party information, data, or communication link made available or hosted by it.

However, the provision will not apply if the intermediary has conspired or abetted or aided or induced, whether by threats or promise or otherwise in the commission of the unlawful act.

The case in brief

In the instant case, a First Information Report was registered against Flipkart Internet Private Limited and its officials under Sections 406, 420, 467, 468, 471, 474, and 474-A IPC after a practising lawyer filed an application under Section 156(3) CrPC before the concerned Magistrate and the Magistrate ordered for registration of an FIR.

It was the case of the complainant that he purchased a Laptop (having a processor of 'intel' brand), from a seller listed on Flipkart. However, the laptop he got had the processor of the 'A.M.D' brand. Thus, the complainant claimed that since the delivery of the product was not as per the specifications for which the order was placed, therefore, the FIR should be registered.

Flipkart's case

Now, challenging this FIR, the petitioner-Company moved the High Court on the ground that Flipkart is an e-commerce Marketplace/Platform that provides access to Buyers and Sellers through their website. Buyers and Sellers meet and interact to execute purchase and sale transactions and Flipkart has a limited role in it.

It was its argument that the website is only a platform that can be utilized by users to reach a larger base to buy and sell products or services and the petitioner-Company is only providing a platform for communication; the actual contract for the sale of any of the products or services is strictly between the Seller and the Buyer of such product.

It was lastly contended that in terms of functionality, Flipkart is an 'intermediary' as defined under Section 2(1)(w) of The Information Technology Act, 20004 providing an online platform. The transactions between the Buyers and Sellers on the platform are completely independent. No criminal offence whatsoever is made out against Flipkart.

Court's observations 

At the outset, the bench of Justice Suneet Kumar and Justice Syed Waiz Mian noted that Section 79 is a safe harbour provision for the internet intermediaries who give access to the host, disseminate and index content, products, and services originated by third parties on the internet. The Court added that it includes e-commerce intermediaries where the platforms do not take the title of the goods being sold. 

The Court further noted that Flipkart, as an intermediary and an online marketplace only acts as a neutral platform to allow sellers to interact with the buyers/customers, without exercising ownership over any goods or indulging in the manufacture or dealing of any goods as it only receives and stores the information on behalf of the seller/ buyer and acts as a facilitator/ intermediary.

Further, the Court said that Flipkart, in this case, is not the Seller, it is the Sellers registered with the Company who are the sellers of products and services on its platform, it is the Sellers who are solely responsible to the purchaser/customer.

It cannot be expected that the provider or enabler of the online marketplace is aware of all the products sold on its Website/marketplace. It is only required that such provider or enabler put in place a robust system to inform all Sellers on its platform of their responsibilities and obligations under applicable laws in order to discharge its role and obligation as an intermediary. If the same is violated by the Seller of goods or service such Seller can be proceeded against but not the intermediary.

Further, the Court held that Flipkart is exempted from any liability under Section 79 of the I.T. Act, 2000, no violation can ever be attributed or made out against the directors or officers of the intermediary, as the same would be only vicarious, and such proceedings as initiated against them would be unjust and bad in law.

The Court underlined that the only liability of an intermediary under Section 79(3)(b) of the I.T. Act, 2000, is to take down third-party content upon receipt of either a court order or a notice by appropriate government authority and not otherwise. The Court further noted that per the complaint filed by the complainant indicates that the petitioner-Company, raised the grievance of the complainant with the Seller, and thus, it fulfilled its duty as per Section 79 of the IT Act.

Consequently, the Plea was allowed and the impugned FIR and the consequent police report was set aside and quashed.

Case title - Flipkart Internet Private Limited v. State Of U.P. And 3 Others [CRIMINAL MISC. WRIT PETITION No. - 3487 of 2019]

Case citation: 2022 LiveLaw (AB) 467

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