This article has been written by Sukanya Mitra, pursuing the Certificate Course in Advanced Civil Litigation: Practice, Procedure and Drafting from LawSikho. This article has been edited by Zigishu Singh (Associate, Lawsikho) and Ruchika Mohapatra (Associate, Lawsikho).
The internet is an essential part of our lives. It brings a lot of convenience with instant communication, availability of any information from around the world, sharing information, online services, and online purchase of goods. It also influences the choices we make, for example, we look at reviews before booking a hotel or buying a product. The internet has thus changed how business is conducted. In this technologically advanced world, a business that does not use the internet is quite lost. Naturally, business conducted online or ‘e-commerce’ may also have disputes. This article explores the jurisdictional issue in e-commerce disputes, specifically the place of suing and cause of action, and the different laws which are applicable.
What is e-commerce?
‘Electronic Commerce’ or ‘e-commerce’ is a type of business model by which businesses and customers buy and sell goods and services over the internet. Business can be conducted entirely online or alongside physical offices/shops.
- Platforms like Amazon enable sellers to directly sell goods to consumers anywhere in the world.
- Platforms like eBay enable individuals to buy and sell among themselves.
- Individuals also create their own websites to sell products such as jewellery, baked goods, etc.
- Many brands which have physical stores also sell their products through their own websites.
E-commerce transactions create problems in determining which court has jurisdiction in case of disputes as sellers and buyers may be located anywhere in the world. A number of laws are applicable to determine the place of suing in e-commerce disputes.
Place of suing
The Code of Civil Procedure, 1908
Sections 15 to 20 of Part I of the Code of Civil Procedure (CPC) provide for the place of suing for movable and immovable property.
- A civil suit is to be instituted in the court of the lowest grade competent to try it.
- Suits regarding immovable property are to be instituted in the courts within the local limits of whose jurisdiction the property is situated.
- The immovable property may be situated within the local limits of 2 or more courts. In a suit to obtain relief or compensation for wrong to immovable property, the suit may be instituted in any of the courts.
- If it is alleged that it is uncertain within which local limits of jurisdiction of 2 or more courts the immovable property is situated, the Court, if satisfied there is ground for alleged uncertainty, records a statement to that effect and then proceeds to entertain and dispose of any suit relating to the immovable property. The decree shall have the same effect as if the property were situated within the local limits of its jurisdiction.
- In a suit for compensation for wrong done to a person or to a movable property, a suit can be instituted in the court within whose local limits of jurisdiction the wrong was done or where the defendant resides or carries on business or personally works for gain.
- Subject to the limitations of Part I, every suit shall be instituted in a court within whose local limits of jurisdiction
- the defendant or each of the defendants, if there are more than one, actually and voluntarily resides or carries on business or personally works for gain, at the time of institution of the suit; or
- any of the defendants actually and voluntarily resides or carries on business or personally works for gain, at the time of institution of the suit, provided that in such case either the leave of the court is given, or the defendants who do not reside, or carry on business, or personally works for gain, as indicated in section 20(b), acquiesce in such institution; or
- the cause of action wholly or partly arises.
The Indian Contract Act, 1872
E-commerce transactions are in the form of e-contracts, that is, contracts modeled, executed, and implemented by software, with or without using the internet. E-contracts have been legally recognised by the Information Technology Act, 2000 in Section 10-A, which states that where the communication, acceptance, and revocation of proposals in a contract are expressed in electronic form or by means of an electronic records, then such contract will not be deemed unenforceable solely on the ground that electronic form or means was used to form the contract.
In the case of M/S BASE Educational Services Pvt. Ltd vs. Kayaka Foundation PU College of Science & Commerce and Others., it was observed by the court that e-contracts can be entered into through modes of communication like internet, e-mail, and fax. The only requirement to validate an e-contract is its compliance with the provisions of the Indian Contract Act.
In the case of Trimex International FZE Ltd., Dubai vs. Vedanta Aluminium Ltd., India, the parties agreed upon the material terms of the contract via emails. The Supreme Court held that the correspondence through email can be considered as a valid binding contract between the parties.
Some of the e-contracts entered into on a daily basis
- Browse Wrap: Such agreement binds a user browsing a website to the updated terms and conditions regarding the usage of the website.
- Shrink Wrap: A license agreement which is enforced on the consumer as soon as he opens the product. Such agreements are usually embedded when purchasing software products such as antivirus software for computers. It indemnifies the seller of any violation of the intellectual property rights of the manufacturer as soon as the buyer opens the pack.
- Click Wrap: Agreements where the user/buyer clicks “ok” or “I agree”. It is a take it or leave it contract as the user cannot move forward unless he clicks that button. These agreements come up in situations like when installing software or purchasing a product online.
E-contracts are fundamentally the same as traditional contracts and thus, are governed by the Indian Contract Act. Section 28 makes agreements in restraint of legal proceedings void. If any party is absolutely restricted from enforcing his rights, under any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may enforce his right, the contract is void to the extent of the restriction.
Contracts specifying that any dispute between the parties will be referred to arbitration and specifying the seat of arbitration are exempted from the rule in Section 28.
The Consumer Protection Act
E-commerce disputes also include consumer disputes. The internet has penetrated every aspect of our lives. Consumers shop online, avail of internet banking services, pay bills online, book tickets and accommodation for holidays, and so on. As the pandemic forced physical shops to close down, and in some cases, for good, the business shifted to the internet, which increased the volume of e-commerce agreements being entered into and executed.
Position under the Consumer Protection Act, 1986
The Act of 1986 allowed a complaint to be filed in the District Forum or State Commission within whose local limits
- the opposite party or each of the opposite parties , if there were more than one, ordinarily resided or carried on business or had a branch office or personally worked for gain, at the time of institution of the suit; or
- with prior permission of the respective Forum, where any of the opposite parties resided or carried on business or had a branch office or personally worked for gain; or
- cause of action, wholly or in part, arose.
In view of e-commerce transactions, the territorial jurisdiction was limited. This is because e-commercial consumer transactions transcend physical boundaries. Manufacturers, sellers, service providers, and buyers may be located in completely different cities or even countries.
The case of SpiceJet vs. Ranju Aery was a landmark judgment in the issue of deciding jurisdiction in disputes in e-commerce transactions. In this case, the complainant had booked air tickets online through yatra.com for traveling from Chandigarh to Bagdogra and return flight from Bagdogra to Kolkata and then a connecting flight from Kolkata to New Delhi. The connecting flight from Kolkata to New Delhi was booked with SpiceJet and all the tickets were booked by the complainant in Chandigarh. The complainant and her family members found out that the connecting flight had been canceled after they had collected their boarding passes. SpiceJet made no alternative arrangements. The complainant managed to book tickets on a later flight. Since the complainant and her family members reached New Delhi later than expected, they missed the bus back home to Chandigarh. The complainant filed a complaint in the District Forum in Chandigarh against SpiceJet seeking compensation in terms of the price of original tickets and tickets which the complainant had to buy due to the cancellation as well as mental harassment of the complainant and her family members. The District Forum passed an order in favour of the complainant and directed SpiceJet to refund an amount of Rs. 80,885/- along with interest @ 9% per annum from the date of cancellation of flight till realisation. Compensation of Rs. 1.25 lakhs and Rs. 10,000/- as litigation cost was also awarded. This was challenged in the State Commission and was dismissed in the preliminary stage. SpiceJet then filed a revision petition in the National Commission.
One of the contention of SpiceJet was that the District Forum in Chandigarh did not have territorial jurisdiction as the company’s place of business was in Gurugram. The National Commission upheld the views of the State Commission that part of the cause of action arose in Chandigarh because booking tickets online forms a contract and the contract was accepted by the complainant through the internet at her place of residence. The National Commission concluded that there was no jurisdictional error in the orders passed by the fora below and confirmed the orders.
The order of the National Commission was challenged by SpiceJet in the Supreme Court by a Special Leave Petition where the Supreme Court upheld the order of the National Commission. The Consumer Protection Act, 1986 was replaced by the Act of 2019. The Act of 2019 now specifically covers e-commerce transactions.
Position under the Consumer Protection Act, 2019
The Act of 2019 defines “e-commerce” as the buying and selling of goods and services, including digital products, over digital or electronic networks [Section 2(16)]. Further, the definition of “consumer” now includes any person who buys goods or hires or avails services through electronic means or by teleshopping or by direct selling or multi-level marketing [Section 2(7)(b)].
The territorial jurisdiction of the District and State Commission has been expanded. Now, a complaint can be instituted where the complainant resides or personally works for gain. This specifically targets e-commerce disputes as the complainant can conveniently file a complaint and the opposite party cannot use the excuse of limitation of territorial jurisdiction to avoid the complaint.
The Information Technology Act, 2000
- offences or contraventions committed outside India by a person irrespective of nationality.
- offences or contraventions committed outside India by any person if it involves a computer, computer system or computer network located in India.
Cause of Action
A court has jurisdiction where the cause of action wholly or in part arises. It has already been discussed that several laws are applicable to e-commerce disputes. Thus, the cause of action in e-commerce disputes may be contractual or non-contractual in nature.
Contractual Cause of Action
A contractual cause of action will arise when a party under a legally valid contract fails to perform its contractual obligations. Failure to perform contractual obligations is termed as ‘breach of contract’ and are the following types;
- Material Breach: An essential element of the contract does not get fulfilled, defeating the purpose of the contract. For example; A enters into a contract to purchase a desktop and printer with B. If B fails to deliver the printer, it constitutes a material breach.
- Minor Breach: A minor breach when a small obligation is not fulfilled. Such an obligation does not impact the contract as a whole. An aggrieved party needs to show that he has suffered financial loss to use this ground when suing the opposite party. For example; a shipment of goods reaches late but otherwise completely intact. The party who received the goods needs to prove that he suffered financial loss due to the delay.
- Anticipatory Breach: A party to the contract informs the other party that he will not be able to fulfil his obligations.
- Actual Breach: A party fails to perform the certain obligations stated in the contract. For example; A agrees to deliver 30 bags of cotton to B on the 15th of November. On the scheduled day, A fails to deliver. This is an actual breach.
In e-commerce consumer disputes, the causes of action which ordinarily arise in consumer disputes, as enumerated in the Consumer Protection Act, 2019, are applicable to file a complaint. Briefly, causes of action in e-commerce disputes are;
- Defective goods,
- Deficiency in services,
- Harm or injury caused by any product to a person or his property,
- Misleading advertisement,
- Restrictive trade practice,
- Spurious goods,
- Unfair trade practice.
A new ground of ‘unfair contract’ has been introduced by the Act of 2019. ‘Unfair contracts’ are contracts between the manufacturer or service provider with the consumer which has terms favouring the manufacturer and against the interests of the consumer. Section 2(46) states that the following terms will be considered as ‘unfair contract’;
- Requiring excessive deposits from consumers to perform contractual obligations.
- Imposing penalty for breach on the consumer which is disproportionate to the loss.
- Refusing to accept early payments on debts.
- Entitling a party to terminate the contract without reasonable cause.
- Allowing a party to assign the contract without consent of the party, who is a consumer, and detriment to his interests.
- Imposing any unreasonable charge, obligation or condition which puts the consumer to a disadvantage.
A term of a contract that is unfair to the consumer can be declared as null and void by the State Commission or the National Commission, as the case may be. [Section 49(2) and Section 59(2)]
The IT Act, 2000 also includes some causes of action for e-contracts:
- Breach of confidentiality and privacy.
- Disclosure of information in breach of lawful contract, specifically specified as ‘personal information.’
Non-Contractual Cause of Action
Some of the non-contractual causes of action are a violation of intellectual property rights such as violation of copyright, trademark, illegally using domain names, cybercrimes such as identity theft.
E-commerce is becoming the usual way of conducting business. Cyberspace is a very dynamic space and the law needs to keep up with it to resolve issues within it. E-commerce disputes present new challenges for the law. E-contracts are the foundation of e-commerce transactions and hence, the Indian Contract Act is primarily applicable. Depending on the nature of the transaction, additional laws may be applicable such as consumer law, IT law, etc to identify jurisdiction, risks and issues, and redressal of grievances. However, technology is continuously evolving and will keep impacting and changing e-commerce, for example, the development of artificial intelligence.
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