The Karnataka government has moved the Supreme Court to challenge the quashing of criminal proceedings against Snapdeal and its co-founders, Kunal Bahl and Rohit Kumar Bansal, over the alleged sale of prescription erectile dysfunction pills on the platform without a valid license or doctor's prescription.
The case centers on a third-party vendor, Herbal Healthcare, that allegedly sold Suhagra, a Schedule H prescription medicine, through Snapdeal's marketplace. Schedule H drugs can only be sold by retail on the prescription of a registered medical practitioner. The Karnataka High Court had previously quashed the criminal proceedings in 2021, ruling that Snapdeal was entitled to safe harbour protection under Section 79 of the IT Act and that an intermediary cannot be held criminally liable for the actions of a third-party seller.
The state's appeal raises a fundamental question: whether safe harbour is absolute. Additional Advocate General Aman Panwar argued that the High Court had wrongly extended safe harbour protection to a prosecution under the Drugs and Cosmetics Act, 1940. He contended that even if Section 79 of the IT Act applied, Snapdeal had failed in its due diligence obligations by allowing the online sale of a prescription drug without ensuring legal compliance.
The Supreme Court has issued a notice to Snapdeal and other co-accused and listed the matter for its next hearing on August 10.
The case sits at the intersection of two unresolved regulatory problems in India. First, the country has no specific law governing the online sale and distribution of medicines. The Draft e-Pharmacy Rules, introduced to define regulatory compliance for online pharmacies, have been pending for nearly eight years without notification. Second, the IT Act's safe harbour provisions were written for a different era of internet platforms and do not clearly address whether sectoral regulations that impose strict liability, such as drug safety laws, can override the intermediary shield.
Indian courts have sent mixed signals on this question. In 2018, the Delhi High Court held that Darveys.com was not entitled to safe harbour because it exercised full control over the products on its platform, actively identifying sellers, promoting them, and handling sales. In 2020, however, a Division Bench of the same court ruled that Amazon and other e-commerce platforms are intermediaries entitled to safe harbour, and that Section 79 is meant to ensure liability for a seller's violations does not attach to the marketplace itself.
The Snapdeal case could force a definitive answer from the Supreme Court. If the court sides with Karnataka, it would mean that e-commerce platforms can be prosecuted under sectoral laws like the Drugs and Cosmetics Act even when they act as intermediaries. That would have far-reaching implications for Flipkart, Amazon, Tata 1mg, and every other platform that hosts third-party sellers of regulated goods. For now, those platforms continue to operate in a grey zone where unlicensed pharmacies sell prescription drugs with little oversight, and the platforms themselves remain shielded from liability.