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Update: Centre amends rule on nodal officer appointments by e-commerce firms

The Ministry of Consumer Affairs, Food and Public Distribution has amended the E-Commerce Rules 2020, which according to experts, earlier made it seem that a sole proprietorship or partnership could not be an e-commerce entity.

The newly-notified Consumer Protection (E-Commerce) (Amendment) Rules, 2021 says, “where an e-commerce entity is a company incorporated under the Companies Act, 1956 (1 of 1956) or under the Companies Act, 2013 (18 of 2013) or a foreign company covered under clause (42) of section 2 of the Companies Act, 2013 (18 of 2013) or an office, branch or agency outside India owned or controlled by a person resident in India as provided in sub-clause (iv) of clause (v) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999), it shall appoint a nodal officer or an alternate senior designated functionary who is resident in India, to ensure compliance with the provisions of the Act or the rules made thereunder.”

Explaining the difference between the newly-notified rule and one that was in place earlier, senior associate at Ikigai Law Aman Taneja said, “The amendment to the e-commerce rules does not create a new requirement for having a nodal officer. That was present in the un-amended rules as well- see Rule(4)(1)(b). What has changed is that they’ve fixed some awkward drafting which made it seem that an individual, a sole proprietorship or partnership could not be an e-commerce entity.”

“The earlier Rule 4 (1) said that an e-commerce entity shall (a) be a company incorporated under the Companies Act etc (basically be a corporate entity) and (b) appoint a nodal officer.  The amended rule paraphrases to “IF (emphasis added) you are a corporate entity of the types listed here THEN (emphasis added) you shall appoint a nodal officer”. It basically clarifies that you don’t have to be a corporate entity to be an e-commerce entity. It’s basically an amendment to make the drafting better,” Taneja added.

Apart from this, the E-commerce Rules 2020 had other rules that the ministry required an e-commerce platform to follow:

  • Display ‘country of origin’ of products
  • Explain how listings on e-commerce platforms work
  • Record information on sellers who sell counterfeit products
  • Record customer’s consent for purchase of any goods or service
  • Partner with the National Consumer Helpline
  • Appoint grievance redressal officer
  • No ‘manipulation’ of prices
  • Product description should be accurate
  • Platforms should vouch for the authenticity of goods/services

Few of these rules have not sat well with e-commerce companies. Earlier this year, the Legal Meteorology Department under the Consumer Affairs Ministry rejected an appeal made by Amazon against a notice asking why it was not displaying the country of origin of a product listed on its platform.

The department had argued that while the rules place the onus of declarations on the manufacturer or seller of a product on e-commerce sites, Amazon “has not shown due diligence in discharging its the duty as an intermediary as the product was uploaded on their website without giving all declarations required under the rules”.

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Update (May 20, 7.34 pm): The earlier version of the story incorrectly implied that the newly notified “E-Commerce Rules 2021” made it mandatory for e-commerce entities to appoint nodal persons for compliance with Indian laws. We have included a statement from Aman Taneja, a senior associate at Ikigai Law

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