Flipkart not liable as intermediary for any inaction by a vendor/seller

(Question of Applicability of Product Liability Claus in CP Act 2019?)

A writ petition filed by Flipkart, Allahabad High Court seeking quashing of the First Information Report (FIR) for offences under Sections 406, 420, 467, 468, 471, 474 and 474-A of the Penal Code, 1860 (IPC)

Issue in the case

The issue of the case is whether an intermediary as defined under Section 2(1) (w) of the IT Act, 2000 would be liable for any action or inaction by a party or a vendor/seller making use of the facilities provided by the intermediary in terms of buyers/sellers terms of use of the company.

The division bench of Suneet Kumar and Syed Waiz Mian, JJ. while quashing the FIR, has observed that an intermediary is not liable for any third-party information, data or communication link made available or posted by it, as long as it complies with Sections 79(2) or 79(3) of the Information and Technology Act, 2000 (‘IT Act’),

Flipkart is an intermediary providing merely access to sellers/buyers and has exercised ‘due diligence’ under Section 79(2) (c) IT Act, 2000, thus, it is exempted from any liability under the IT Act

Facts of the case;

1.      In this case, the respondent alleged that he ordered a laptop from Flipkart, but it was having processor of brand ‘A.M.D’ instead of brand ‘Intel’, thus, the delivery of the product was not as per the specifications for which order was placed. Thus, aggrieved, the respondent registered a complaint with Flipkart regarding the alleged discrepancy of the product. The complaint was taken up by Flipkart as per their Dispute Redressal Policy, with the seller, but he declined to replace or refund the consideration of the product, stating that the product was dispatched as per specifications purchased by the respondent.

2.      Customer lodged a complaint /FIR against Flipkart. Flipkart approached High court with request to quash FIR on the ground that it is an e-commerce platform that provides access to buyers and sellers through their website, where they meet and interact to execute purchase and sale transactions, subject to terms and condition as set out in the buyers/sellers terms and Flipkart is not a party to or in control of any such transaction between its users.

3.      The Court observed that Section 79 is a safe harbour provision. Further, internet intermediaries give access to host, disseminate and index content, sell-buy products and services originated by third parties on the internet that includes e-commerce intermediaries where the platforms do not take title of the goods being sold.

4.      2008 amendment introduced Chapter XII to the IT Act, 2000, which ceased the liability of an intermediary, if it satisfied certain requirements as detailed in Section 79 of IT Act, 2000. The Court observed that Flipkart does not follow inventory-based model of e-commerce, where inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly, thus it comes within the meaning and definition of ‘intermediary’ under Section 2(1) (w) of the IT Act, 2000, and would be entitled to the exemption from liability in terms of Section 79 IT Act, 2000, if the requirements are met.

5.      Further, it cannot be expected that the provider of the online marketplace is aware of all the products sold on its website, but such provider must 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, and if the same is violated by the seller, then he can be proceeded against, but not the intermediary.

6.      The Court also observed that as per the Consumer Protection (E-Commerce) Rules, 2020, Flipkart would come within the meaning of a marketplace e-commerce website, thereby affording it the above exemption so long as the requirements under Section 79 are met. Thus, as Flipkart has complied with the requirements of Sections 79(2) and 79(3) I.T Act, as well as, the Information Technology (Intermediaries Guidelines) Rules, 2011, thus it is exempted from any liability under Section 79 IT Act, 2000, as no violation can ever be attributed or made out against the directors or officers of the intermediary,

[Flipkart Internet Private Limited v. State of UP, 2022 SCC Online All 706, decided on 17.10.2022...

Another Similar  case ;
Intermediary entitled to claim protection u section 79 it act for criminal-liability unless active role is disclosed Delhi high court quashes fir against flip kart/

Decided on 19/08/2022

FIR by Managing Director of Sanash Impex Pvt. Ltd

Question of applicability of Product Liability clause under CP Act 2019

Does the above case affect Product Liability clause in CP Act 2019? Let’s understand the provision of the Act

Section .84. Of Consumer Protection Act 2019

(1) A product manufacturer shall be liable in a product liability action, if—

(a) the product contains a manufacturing defect; or

(b) the product is defective in design; or

(c) there is a deviation from manufacturing specifications; or

(d) the product does not conform to the express warranty; or

(e) the product fails to contain adequate instructions of correct usage to prevent any harm or any warning regarding improper or incorrect usage

Section 86. Of CP Act 2019

A product seller who is not a product manufacturer shall be liable in a product

liability action, if—

(a) he has exercised substantial control over the designing, testing,

manufacturing, packaging or labelling of a product that caused harm; or

(b) he has altered or modified the product and such alteration or modification

was the substantial factor in causing the harm; or

(c) he has made an express warranty of a product independent of any express

warranty made by a manufacturer and such product failed to conform to the express

warranty made by the product seller which caused the harm; or

(d) the product has been sold by him and the identity of product manufacturer

of such product is not known, or if known, the service of notice or process or warrant

cannot be effected on him or he is not subject to the law which is in force in India or the

order, if any, passed or to be passed cannot be enforced against him; or
From the above clauses, flip kart comes under sub clause (d) of section 86 which says ‘liability in product liability action’ meaning thereby he can be made party, liable to disclose whereabouts of seller and can also take responsibility to receive and send notice on their behalf.

.

Status of Flipkart as E-Commerce entity

 

E-Commerce Entity defined under new Law

      "e-commerce entity" means any person (whether natural or juridical) who owns, operates or manages a digital or electronic facility or platform for electronic commerce,

 

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