IndiaMart v CDSCO: A test of intermediary liability

The clash between one of India’s largest B2B marketplaces and the country’s drugs regulator challenges the “passive” position of such platforms with regards to allegedly unlawful pharmaceutical listings, says Aarti Aggarwal of Remfry & Sagar.

India’s pharmaceutical sector operates under exacting regulatory scrutiny—a scrutiny that has only intensified as digital channels have transformed how drugs are marketed and accessed.

The point was brought home recently when the Central Drugs Standard Control Organisation (CDSCO) issued a formal advisory prohibiting pharmaceutical companies from promoting GLP-1 weight-loss drugs (Ozempic, Wegovy, Mounjaro etc) through indirect means such as disease awareness campaigns and influencer activity.

The regulator’s message was clear: in a sector governed by strict public health law, there is no safe distance from accountability. That same message is also under test with regard to online sales on a digital marketplace.

IndiaMart is one of India’s largest B2B marketplaces, connecting buyers and sellers across sectors including pharmaceuticals. It positions itself as a neutral listing platform—a “digital yellow pages”—facilitating discovery without participating in manufacture, storage, distribution or sale.

Unlike inventory-based e-commerce models that act as principals with direct statutory obligations, IndiaMart claims to operate solely as a hosting intermediary subject to notice-and-takedown compliance.

Its legal position rests on Section 2(1)(w) and the safe harbour under Section 79 of the Information Technology Act, 2000 (IT Act). Intermediaries are protected from liability for third-party content if they do not initiate transmission, select the receiver, or modify information, and if they act expeditiously upon obtaining actual knowledge of illegality.

That protection is now being tested in the pharmaceutical context, a sector governed by strict public health regulation.

The CDSCO proceedings before the Delhi High Court

The issue has crystallised before the Delhi High Court in IndiaMart Intermesh v Central Drugs Standard Control Organisation & Ors (WP(C) 13760/2025). On September 9, 2025, the court granted interim relief restraining the CDSCO from pursuing criminal action against IndiaMart concerning allegedly unlawful pharmaceutical listings.

CDSCO invoked Sections 18 and 27 of the Drugs and Cosmetics Act, 1940, which regulate the manufacture, sale and distribution of drugs and prescribe penalties. Its case is that prescription-only medicines were listed and made available contrary to statutory restrictions. IndiaMart argues that these provisions apply to manufacturers and sellers, not a platform that merely hosts listings, and that it neither sells nor distributes drugs.

In turn, the regulator contends that repeated notices between June 2024 and July 2025 put IndiaMart on notice of continuing violations, undermining any claim of neutrality. The next hearing is listed for April 7, 2026.

The matter is being closely watched as a test of intermediary immunity in a regulated sector.

IndiaMart’s terms of use—allocation of responsibility

Clause XVIII of IndiaMart’s Terms and Conditions (“Pharmaceutical Products/Services Policies”) states that the platform does not sell pharmaceutical products but merely displays or advertises third-party listings. Sellers must comply with the Drugs and Cosmetics Act, 1940; the Drugs and Cosmetics Rules, 1945; and the Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954.

The terms expressly prohibit sale of drugs listed in Schedules H, H1 and X without a valid prescription and place compliance responsibility solely on the seller. IndiaMart disclaims responsibility for the legality or quality of listed products and includes an indemnity clause in its favour. Contractually, regulatory responsibility is shifted entirely to third-party sellers to reinforce its passive intermediary position.

Statutory restrictions on prescription drug sales

The Drugs and Cosmetics Act, 1940 and the Drugs and Cosmetics Rules, 1945 strictly regulate prescription drug sales. Rules 65(11) and 65(11-A) require that drugs under Schedules H, H1 and X be supplied only against valid prescriptions with procedural safeguards. Rule 97(1)(b) and (1)(d) mandate labelling warnings that such drugs must not be sold without prescription.

The Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954 further restricts drug advertisements and therapeutic claims.

These provisions are strictly construed from a public health perspective. The regulator’s argument is that listing prescription drugs online without structural prescription verification risks facilitating statutory violations, even if the platform does not consummate the sale.

Safe harbour—conditional, not absolute

Under Section 79 of the IT Act, protection is conditional. Immunity is lost if, upon receiving “actual knowledge” through court order or competent authority notification, an intermediary fails to remove or disable access expeditiously (Section 79(3)(b)). A central issue is whether repeated statutory notices constitute actual knowledge and whether continued listings defeat safe harbour.

The IT (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 require intermediaries to inform users not to host unlawful content and to observe due diligence. The adequacy of IndiaMart’s monitoring systems may therefore be scrutinised.

The broader question is whether platforms in highly regulated sectors may rely solely on reactive takedown mechanisms or must adopt proactive safeguards.

Emerging trends

Judicial precedent provides context. In Pfizer v Triveni Interchem (CS(COMM) 442/2021), unauthorised listings of Pfizer medicines on IndiaMart were challenged; the seller was directed to remove infringing content, and IndiaMart was subject to court-supervised takedown obligations.

In IndiaMart Intermesh v Puma (2024 SCC Online Del 17; 2025 SCC Online Del 4165), a single judge initially denied safe harbour in a trademark dispute, holding that dropdown references to “Puma shoes” amounted to trademark use.

The Division Bench reversed this finding, recognising IndiaMart as a neutral listing service eligible for safe harbour provided it promptly removes infringing listings upon notice. The appellate court clarified that safe harbour survives only where prompt and effective compliance is demonstrated, including reasonable efforts to prevent re-listing of previously removed infringing products.

IndiaMart has also engaged in enforcement efforts. In December 2023, it reportedly worked with Novo Nordisk regarding illegal listings of Wegovy, as reported by Reuters. A structured framework was discussed to periodically alert the platform to counterfeit listings.

However, Reuters identified multiple listings of Wegovy, Ozempic and purported semaglutide copies during September—November 2023, some of which reportedly remained accessible despite removals. IndiaMart has also been included in the US “Notorious Markets” list (2022 and 2024) citing counterfeit concerns.

In June 2025, enforcement action in Tamil Nadu led to significant curbs on Schedule-H drug listings on IndiaMart. Following police notices under Section 35 of the Bharatiya Nagarik Suraksha Sanhita (the Indian equivalent of criminal penal code), the investigation revealed that youths had allegedly procured over 10,000 scheduled drug tablets through listings hosted on the portal, sourced without prescription and resold at inflated prices using courier deliveries and false addresses.

Police alleged that sellers contacted buyers through WhatsApp and Instagram after initial discovery on the platform, and that at least one fatality was linked to injectable drugs allegedly purchased via such channels. After engagement with law enforcement, IndiaMart reportedly banned approximately 100 such drugs from its platform.

Conclusion

These developments illustrate the central tension in the intermediary debate for pharmaceutical products. When subjected to formal enforcement, IndiaMart adopted broader corrective measures, including category-wide bans, demonstrating capacity for systemic intervention.

However, youth access to prescription drugs, cross-border sourcing, inflated resale and reported fatalities underscore the public health risks inherent in lightly regulated online listings.

The core legal question remains whether a reactive, notice-based compliance model suffices in a highly regulated industry where statutory breaches carry serious consequences. While IndiaMart has shown willingness to engage with regulators and rights holders, the persistence of unlawful listings raises doubt as to whether intermediary due diligence is adequate.

Constructive engagement focused on proactive safeguards, rather than purely adversarial enforcement, may offer a commercially effective path forward as courts continue to delineate the contours of safe harbour in regulated sectors.

Aarti Aggarwal is a senior associate at Remfry & Sagar. She can be contacted at: aarti.aggarwal@remfry.com