Delhi High Court Seeks Flipkart's Response Over Tackling Misuse Of GST By Rogue Sellers

The Delhi High Court has directed Flipkart to investigate the issue of misuse of GST by rogue sellers on the e-commerce platform and sought its response on the steps which can be taken to ensure that the misuse does not take place on the website. 

“In replying to this, they will be cognizant of their own process and policy which is inter alia part of the 'Beginners Guide to selling on Flipkart' and disclose as to how are these implemented,” Justice Anish Dayal said.

The court also asked Flipkart to investigate into whether different FSN numbers can be provided for different sellers of the same product, considering that the marketplace allows any seller to sell their product.

“Defendant no. 1 shall file a tabulation demonstrating compliance with Rules 5 and 6 of the E-commerce Rules, specifically tabulating the Rule in question and the nature of compliance which is done by them currently,” it added.

The court was dealing with a suit filed by Zydus Healthcare Limited against Flipkart over sale of its counterfeit hair colour products under the trademark "CUTICOLOR".

It was alleged that counterfeit hair colour products with the same mark and similar packing were being sold by unknown defendants giving identities of fake sellers on Flipkart.

Pusuant to court's order, Flipkart filed a compliant affidavit placing on record the steps taken by it to ensure due diligence while discharging its duties as an e-commerce marketplace.

Flipkart told court that it publishes on its website, rules and regulations, privacy policy, and user agreement which every user or buyer or seller needs to accept before using the platform.

It further said as part of the agreement, there are certain warranties which are applicable to the seller that they shall not upload, post, or display products that violate any intellectual property rights or any other proprietary rights.

Flipkart also told court that as per the Information Technology (Intermediary Guidelines and Digital Media Ethics Code Rules) 2021, since they qualify as an intermediary, they have provided an agreement mechanism for intellectual property infringement on its platforms with a take down mechanism.

It further submitted that Flipkart follow measures to prevent counterfeiting, which are taken both as proactive measures, at the time of onboarding the seller, and reactive measures, taken after receipt of complaint.

Perusing the onboarding requirements of other e-commerce websites, the court said that aside from the basic information relating to identification and bank account and GST, each of the platform requires a seller to submit some kind of document to show authority to sell the product, which could be a trademark certificate, manufacturing license, selling license, distribution license or an authorization letter.

“It seems prima facie that e-commerce websites are cognizant of counterfeit issues and are taking steps to counter the same on their e-commerce platforms in order to give assurance to brand owners, as well as, users that the website is predominantly sanitized and counterfeit products would be weeded out by some filtration process,” the court said.

While listing the matter for hearing on May 28, the court asked Flipkart to provided its affidavit to the counsel for Zydus Healthcare at least three days before the next date of hearing.

“Counsel for plaintiff shall inform by written communication about their authorised sellers whose products were taken down because of FSN issue; this written communication may be addressed to counsel for defendant no.1; defendant no.1 will revert back within 48 hours on the process to be followed in order that such listings are activated; parties shall collaborate in order to ensure that due technical process is followed in order that these listings of authorised sellers are activated,” the court ordered.

Counsel for Plaintiff: Mr. Chander M. Lall, Senior Advocate with Ms. Aadya Chawla, Mr. George Vithayathil, Ms. Nandini Choudhary, Ahaana Singhrana, Mr. Abhinay Bhalla and Ms. Annanya Mehan

Counsel for Defendants: Mr. Jayant Mehta, Sr. Advocate with Mr. Ankur Sangal, Mr. Ankit Arvind and Mr. Kiratraj Sadana, Advocates; Mr. Sharad Malhotra, Advocate of D-6

Title: ZYDUS HEALTHCARE LIMITED v. FLIPKART INTERNET PVT LTD & ORS.

Click here to read order