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2020 Supreme(Del) 44

IN THE HIGH COURT OF DELHI AT NEW DELHI
S. MURALIDHAR, TALWANT SINGH, JJ.
Amazon Seller Services Pvt. Ltd. & Others - Appellant
Versus
Amway India Enterprises Pvt. Ltd. & Others - Respondent
FAO(OS). Nos. 133, 134, 135, 141, 142, 157 of 2019 & CM. APPL. Nos. 32954, 32956, 32958, 34228, 34230, 37244 of 2019 (stay)
Decided On : 31-01-2020

Advocate Appeared:
Gurukrishna Kumar, Sr. Advocate, Saikrishna Rajagopal, Sidharth Chopra, Sneha Jain, Sauni Dutt, Devvrat Joshi, Surabhi Pande, Nilofar Absar, Abhiti Vaccher, Vivek Ayyagari, Nischal Anand, Praful Shukla, Advocates, Parag Tripathi, Balbir Singh, Jayant Bhushan, Senior Advocates, Priya Kumar, Shailabh Tiwari, C.D. Mulherkar, Chanakya Deviedi, Tejas Chhabra, Anand Chichra, Arjun Maheshwari, Kunal Dhawan, Lalltaksh Joshi, Mahesh B. Chhibber, Monica, Pooja Dodd, Vinay Tripathi, Saksham Dhingra, Aman Singhal, Aditi Menon, Ketal Paul, Tushar Bhushan, Amartya Bhushan, Ayush Samaddar, Saikrishna Rajagopal, Sidharth Chopra, Sneha Jain, Savni Dutt, Devvrat Joshi, Surabhi Pande, Rajshekhar Rao, Aditya Verma, Shantanu Rawat, Siddharth Rawal, Chaitanya, Priya Kumar, Priya Adlakha, Tulip De, Ashish Sharma, Ruhee Passi, Tejas Chabra, Advocates.

Headnote:(A) Direct Selling Guidelines, 2016 - Established that the DSGs are advisory and not binding law. The court emphasized the principle that the sale of products through unauthorized channels, without the consent of the direct selling entity, violates the entity's rights. (Paras 70-76)

(B) Trademark Infringement - Found that the online platforms infringed trademark rights of the plaintiffs through unauthorized sales that resulted in misrepresentation and dilution of brand reputation. (Paras 93-112)

(C) Intermediary Status - The court held the online platforms are entitled to protection under Section 79 of the IT Act since they operate as intermediaries that do not alter or initiate sales transactions. (Paras 117-126)

(D) Tortious Interference - Established that mere knowledge of contractual terms does not imply inducement to breach, and evidence is required to prove any such inducement. (Paras 130-133)

Facts of the case:
Appeals were made against a judgment granting injunctions against the sale of certain products via the plaintiffs’ e-commerce platforms, where it was claimed that unauthorized sales occurred.

Findings of Court:
The court concluded that the learned Single Judge erred in holding the DSGs binding and in concluding that e-commerce platforms were actively participating in trademark infringement.

Issues: Determination of the binding nature of DSGs, violations of trademark rights, status of e-commerce platforms as intermediaries, and tortious interference.

Ratio Decidendi: The court set aside the findings that treated the DSGs as law and decided that e-commerce platforms are entitled to the safe harbor provisions protecting them from liability as intermediaries.

Result: Appeals allowed.

Table of Content
1. overview of the case and appeals. (Para 1 , 2 , 3 , 4)
2. amway's business operations and guidelines. (Para 5 , 6 , 7 , 8)
3. product tracking and refund policy. (Para 9 , 10 , 11 , 12)
4. unauthorized sales and complaints. (Para 13 , 14 , 15)
5. amazon's role and response. (Para 16 , 17 , 18)
6. lc findings and product tampering. (Para 19 , 20 , 21)
7. court's binding interpretation of dsgs. (Para 39 , 40)
8. issues surrounding trademark and intermediary status. (Para 94 , 132)
9. final judgment and implications. (Para 138)

JUDGMENT :

S. MURALIDHAR, J.

Introduction

1. These are six appeals directed against the same impugned common judgment dated 8th July, 2019 passed by the learned Single Judge in interlocutory applications filed in the corresponding suits by the Respondents in these appeals. By the said judgment, the learned Single Judge has injuncted the Appellants from selling the goods of the Respondents, who claim to be Direct Selling Entities (‘DSEs’) in terms of the Model Framework for Guidelines on Direct Selling dated 26th October, 2016 i.e. Direct Selling Guidelines (‘DSGs’), on the Appellants’ e-commerce platforms.

2. Three of the present appeals i.e. FAO (OS) 133/2019, 134/2019 and 135/2019 are by Amazon Seller Services Private Limited (‘Amazon’) against Amway India Enterprises Private Limited (‘Amway’), Oriflame India Private Limited (‘Oriflame’) and Modicare Limited (‘Modicare’), respectively. Two of the appeals, FAO (OS) 141/2019 and 142/2019 are by Cloudtail India Private Limited (‘Cloudtail’) against Amway and Oriflame respectively. The sixth appeal i.e. FAO (OS) 157/2019 is by Snapdeal Private Limited (‘Snapdeal’) against Amway.

3. Since common questions of law arise from the impugned judgment of the learned Single Judge and the pleadings in the corresponding suits, they are being disposed of by this judgment.

4. At the outset, it is required to be noticed that the parties before the Court have categorically stated that the suits filed by the Respondents and the corresponding appeals before this Court are not to be considered as arising out of “commercial disputes”, falling within the purview of the Commercial Courts Act, 2015 (‘CCA’). They have accordingly been heard by this Bench, which is otherwise not authorised to hear appeals which are to be heard by the Commercial Appellate Division of this Court in terms of the CCA.

Facts in Amazon’s appeals

5. Amway is engaged in the manufacture and distribution business of its healthcare, wellness, cosmetic, and home products through a business model called the Direct Selling Business Model (‘DSBM’). The products offered for sale by Amway include moisturizers, creams, lipsticks, detergents, surface cleaners, shaving creams, deodorants etc. Amway claims that it has given an undertaking to the Government of India (‘GoI’) to abide by the DSGs in the conduct of its business. Amway also sells its products on its own online market place, www.amway.in.

6. Amway is a wholly-owned subsidiary of Amway Corporation, now known as Alticor Inc., headquartered at Ada, Michigan, USA. The parent company which was founded in 1959 applied to the Ministry of Industry, GoI in June, 1994 for setting up a wholly owned subsidiary to replicate the “Amway Model”, proposing to “establish and develop a direct selling business of products which shall be sourced from local independent Indian manufacturers particularly small scale units by providing technology support to products of international standard”.

7. After the GoI granted its approval to Amway Corporation by an order dated 26th August, 1994 to commence operations in India as a DSE in terms of its proposal, Amway came to be incorporated on 3rd August, 1995. On 4th August, 2004, GoI granted approval to Amway to set up its own manufacturing facilities for manufacture of personal care and cosmetic products and to also import fragrances, shampoos, lotions, body firming gels, scrubs etc. This was made subject to the conditions which inter-ali

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