The Delhi High Court on Friday set aside a single judge's order restraining e-commerce majors like Amazon, Flipkart and Snapdeal from selling health and beauty products of direct sellers -- Amway, Modicare and Oriflame -- without their consent.
A bench of justices S Muralidhar and Talwant Singh quashed the July 8, 2019, interim order of the single judge, saying no case was made out for providing such a relief to the direct selling entities (DSEs).
The court also imposed a cost of Rs 50,000 on the direct sellers to be paid to the e-commerce platforms in each of their six appeals.
The e-commerce majors, represented by senior advocate Gurukrishna Kumar and advocates Saikrishna Rajgopal and Rajshekhar Rao, had contended in their appeals that the single judge gave broad findings on issues which were not raised in the suits filed by the DSEs.
The single judge, Justice Prathiba M Singh, in her order, had observed that the goods of the DSEs being sold by the e-commerce giants had inflated MRPs and were tampered with, and that expired products were being given new manufacturing dates.
Justice Singh had also observed that the e-commerce majors have the obligation to maintain sanctity of the contracts and should not encourage or induce a breach.
Disagreeing with the Singh's decision, the division bench said that "many issues on which findings were returned are of a nature which necessitate evidence to be led by the parties and the matter having to go for trial to test the veracity of the cases of the respective parties".
"In fact, the issues that have been framed in the impugned judgment for the purposes of relief appear to travel far beyond the pleadings in the suits and, in fact, at a stage when the issues in the suits themselves are yet to be framed."
The bench further said that the single judge took into account submission on behalf of the Union of India when it was not even a party to the suits.
"These are suits governed by the Civil Procedure Code. The procedure adopted by the learned single judge in requiring the additional solicitor general to address arguments on behalf of the Union of India at an interlocutory stage, without it being party to the suits themselves, was, therefore, untenable," the court said.
The bench also disagreed with the single judge's finding that the direct selling guidelines (DSGs) were binding law to be followed by the DSEs as well as the e-commerce majors.
It said,"The DSGs are not meant to be treated as laws... It was only to be a model framework and advisory in nature. It was for the state governments to adopt it into a law."
The bench said that "there was no occasion" for the single judge to, at the stage of considering applications for interim injunction, return a conclusive finding that Amazon was a massive facilitator and plays an active role in the sales process.
"These are too sweeping and definitive a set of findings which have to be properly rendered at the conclusion of the trial. Here again there is prima facie merit in Amazon's contention that merely because it packs and ships the product does not mean that the sale is consummated by Amazon," the court said.