Account Blocking: Karnataka High Court Stays Payment Of 'Exemplary' Cost By X Corp Subject To Depositing ₹25 Lakh

A division bench of Chief Justice Prasanna B Varale and Justice M G S Kamal today said, “We direct the appellant to deposit Rs 25 lakh within one week in this court and list the appeal after 2 weeks. We make it clear that permission to deposit an amount may not be treated as acceptance by this court that equity lies in favour of the appellant. This is only on statement made by the appellant that to show bonafides. As such, on deposit of Rs 25 lakh the order of the single judge bench is stayed until the next hearing date.”

The Court also permitted the Union government to file its statement of objections to the appeal and application for vacation of interim order, if so advised, by the next date.

The company in its appeal contends that imposition of such exemplary costs is plainly unjust and excessive, and it effectively deters it as well as other intermediaries from challenging blocking orders that violate Section 69A or the Blocking Rules. By way of interim relief, it had sought stay on payment of cost.

During the hearing the court remarked that the company had shown scant regard to the law of the country and failed to comply with the blocking orders passed by the competent authority.

However, Advocate Manu Kulkarni appearing for the company submitted that they were in compliance of the authority's order while appearing before the single bench. "It is not even the State's case that I was in non-compliance with the orders,” he said.

Central government counsel Kumar M N on the other hand raised an objection as to locus standi of the appellant. However, the court observed, “Your (government) submission that petition is not maintainable as he is stepping into other persons shoes is negated by the single judge bench.”

It orally added, “His shop runs because of the content. If you choose to block something you don't like, then will his shop not shut? He has a choice of selling all products. You can object the product saying it is sub standard, but on this reason you cannot take action against the shop keeper.”

The company in its appeal says that if the single bench decision is upheld, the Union Government will be "emboldened" to issue more blocking orders that "violate Section 69A, the Blocking Rules, and the procedures and safeguards mandated" by the Supreme Court in the Shreya Singhal case.

It is argued that the impugned order failed to follow the plain language of Section 69A(1) that reasons must be recorded in writing in a blocking order. It erroneously holds that Section 69A(1) does not require blocking orders to contain reasons in writing, the appeal says. Moreover, the impugned order's interpretation of Section 69A(1) leads to redundancy of words, which is impermissible in law, it is contended.

The appeal also questions the order inasmuch it permits blocking of accounts as a whole, including all future innocuous content posted by those accounts. It says, “The plain language of Section 69A(1) authorizes only the blocking of information that already exists, and therefore the Impugned Order should have applied a literal interpretation. It cannot justify adopting a purposive interpretation because the language of Section 69A(1) is unambiguous.”

Further it is said “The Impugned Order erroneously held that, although Appellant has locus-standi to bring a petition under Article 226, Appellant cannot claim the protection of Article 21 of the Constitution of India because it is not a natural person. This holding is wrong because it contradicts the Hon'ble Supreme Court's decision in K.S. Puttaswamy (Privacy-J.) v. Union of India (2017).”

It is also said that the impugned order should be set aside because it ignored the respondent's failure to comply with Rule 14 of the Blocking Rules. The order failed to apply the doctrine of proportionality that is an inherent part of Articles 14 and 21 of the Constitution, which apply to Appellant, it is averred.

Further it says, “The Impugned Order misstates material facts because it returns an erroneous finding that Appellant's "representatives who admittedly participated in several meetings of the Committee, never indicated to the authorities the grievances that are being now aired". This finding is erroneous because Appellant raised all of the relevant issues with the Rule 7 Committee and Respondents numerous times.”

The matter will now be taken up on August 24.

Case Title: X Corp And Union of India

Case No: WA 895/2023