The Karnataka government has moved the Supreme Court, challenging the quashing of criminal proceedings against Snapdeal and its co-founders, Kunal Bahl and Rohit Kumar Bansal, over the alleged sale of erectile dysfunction pills on its platform without a valid licence or a prescription.
What are the allegations against Snapdeal? The Karnataka government alleges that a third-party seller sold Suhagra-100 tablets through Snapdeal’s online marketplace, despite not having a valid licence, and supplied the drug without requiring a doctor’s prescription, as per a Bar and Bench report.
- Suhagra is a Schedule H prescription medicine used to treat erectile dysfunction in men and can only be sold by retail on the prescription of a registered medical practitioner. The third-party vendor in question is Herbal Healthcare.
- Snapdeal, its co-founders, and Herbal are accused of enabling and supplying a drug in contravention of the provisions of the Drugs and Cosmetics Act, 1940 and the Drugs and Cosmetics Rules, 1945.
The core dispute in the Snapdeal case: The Karnataka government, in its appeal to the Supreme Court, has raised two primary concerns:
1. Safe harbour protection should not override public health laws. The Karnataka government argues that Section 79 of the IT Act should not automatically shield online intermediaries from prosecution under other laws, specifically those designed to protect public health, such as the Drugs and Cosmetics Act, 1940.
2. Snapdeal allegedly failed to exercise due diligence. Additional Advocate General Aman Panwar, appearing for the Karnataka government, argued that the Karnataka High Court had previously wrongly extended safe harbour protection to a prosecution under the Drugs and Cosmetics Act.
- He further argued that even if Section 79 of the IT Act were to apply, Snapdeal had failed to fulfil its due diligence obligations by allowing online sale of a prescription drug without ensuring compliance with legal requirements.
- After hearing the submissions, the Supreme Court issued a notice to Snapdeal and other co-accused in the case and sought their response. The matter has listed for next hearing on August 10.
What did the Karnataka HC say earlier? It is to be noted that the Karnataka High Court had quashed criminal proceedings against Snapdeal and its co-founders in this case in 2021, ruling that:
- Snapdeal, as an intermediary operating an online marketplace, was entitled to safe harbour protection under Section 79 of the IT Act.
- It had exercised the required due diligence.
- An intermediary and its directors cannot be held criminally liable for any action or inaction of a third-party vendor/seller.
MediaNama’s take: This case should serve as a reminder to all that online platforms like Flipkart, Amazon, Tata 1mg, and Snapdeal still operate in a regulatory grey zone in India. The country has no specific law to regulate online sale and distribution of medicines (prescription or non-prescription).
While the Drugs and Cosmetics Amendment Rules, 2018 (Draft Rules) were introduced to clearly define regulatory compliance for e-pharmacies, the policy is yet to be notified, and has been pending for almost eight years.
The IT Act, which also governs e-pharmacies and e-pharmacy portals, shields intermediaries from any liability for the violations committed by the ‘seller’ or the ‘buyer’. However, it does not deal with illegal websites selling drugs online nor does it provide a mechanism to deal with such sites.
This creates a situation where unlicensed pharmacies roam almost entirely unchecked on e-commerce platforms, while the latter is protected from liability under safe harbour provisions. The Snapdeal case raises a fundamental question: Is safe harbour absolute and does the IT Act prevail over sectoral regulations that impose strict liability on all parties involved in the online sale of goods and services?
Safe harbour has been challenged and denied in the past. In 2018, the Delhi High Court denied safe harbour protection to members-only fashion marketplace Darveys.com because it had “an active participation in the selling process”. The court observed that the platform had full control over the products. It was “identifying the sellers, enabling the sellers actively, promoting them and selling the products in India. The role of Darveys.com is much more than that of an intermediary.”
- Amazon vs Amway: By contrast, a Division Bench of the Delhi High Court in 2020 held that Section 79 of the IT Act governs both passive and active intermediaries and doesn’t distinguish between them as far as the availability of safe harbour provisions is concerned. It also noted that Section 79 of the IT Act is meant to ensure that the liability for non-compliance and/or violation of law by a third party, that is, the seller, is not fastened on the online marketplace.
- CDSCO vs IndiaMART: In September last year, the Delhi HC restrained the Central Drugs Standard Control Organisation (CDSCO) from initiating criminal proceedings against IndiaMART for allegedly selling fake and unapproved drugs. IndiaMART had argued that the provisions of the Drugs and Cosmetics Act do not apply on the company and cannot be held responsible in accordance with safe harbour provisions of Section 79 of the IT Act.
Also read:
