The 72-hour crisis that could upend Meta’s business in India as firm risks losing legal protection

Tensions are high between Meta Platforms and Indian regulators after the company came under fire in the country twice in short succession.

The tech behemoth briefly restricted a Facebook post by Prime Minister Narendra Modi addressing students during the Gen Z protests in July , just days after regulators summoned the company over concerns about child-abuse content. While it later said the restriction was due to an "error," initially the post reportedly indicated the content was blocked due to a "legal request."

A parliamentary panel on Wednesday demanded an apology from Mark Zuckerberg within three days for the restriction on Modi's post — failing which it recommends revoking the social media giant's safe harbor immunity in the country. This would make Meta liable for the user-generated content on its platform.

India is a key market for Meta , with the largest user bases for WhatsApp, Instagram, and Facebook, and legal experts told CNBC that it would become almost impossible for Meta to operate in the country if the safe harbor protection is withdrawn.

They added, however, that India would need to amend the broader legal framework to remove the safe harbor rights of the platform.

Meta, though, is keen to assuage concerns of the regulators, especially those around Modi's post.

Joel Kaplan, Meta's chief global affairs officer, who was in a meeting with India's Information Technology Minister Ashwini Vaishnaw on Wednesday, said he "apologized" to the minister "for the error restricting PM Modi's post," the company said in a press statement.

But local media reports the same day, quoting government sources , said that it was Meta's founder and CEO Zuckerberg who made the apology for the presence of child abuse content, deepfake material and errors in operating the platform.

Meta did not comment on the authenticity of these claims in the official statement shared with CNBC.

In an interview with ANI on Wednesday, Nishikant Dubey, the chair of a parliamentary panel on communications and information technology, wrote to India's information technology and home ministry, demanding an apology from Zuckerberg himself.

"Zuckerberg must apologize within three days" for deleting Modi's video addressing students, Dubey said, saying the platform was misusing the privilege of safe harbor protection -- adding that if it is revoked "there could be a nationwide flood" of formal police complaints against Meta, he added.

During the Gen Z protests in India last month, Instagram, Meta's short video app, became a popular platform for public discourse in the country. Modi started to make reels to appeal to the young protesters.

But this growing influence is also exposing the U.S. company to intense government scrutiny over lapses in content moderation and concerns over user privacy. The Indian government last month issued a stern warning to Instagram to remove child abuse ads on its platform that followed a warning to WhatsApp over the rollout of a username feature.

Meta's global team will remain in India to conduct "three to four" additional meetings with the ministry that will assess whether the social media company is complying with Indian laws, Indian news agency ANI reported on Thursday.

Meanwhile, Saurav Das, spokesperson of the Cockroach Janta Party which steered the Gen Z protest in India, said that Meta was restricting access to his content and claimed it was succumbing to "high-handed pressure from the government."

India's Ministry of Electronics and Information Technology didn't respond to CNBC's calls and emails seeking comment on the proposal to withdraw Meta's safe harbor immunity.

Safe harbor protection grants conditional immunity to social media companies, explained Udit Mendiratta, technology and disputes partner at Argus Partners.

He added that this immunity can be removed if a social media platform has abetted an unlawful action, if it has failed to remove content "expeditiously" after a court or government order, and if it fails "due diligence obligations" in removing child sexual abuse material, deepfakes and hate speech.

However, he said that under the existing Indian law, "loss of immunity is content specific," and the law would need to be amended to remove the safe harbor immunity of an entire platform.

While the Indian government is yet to take any official action, experts said any decision affecting safe harbor would be monitored by the technology industry because it will alter the liability framework.

"Safe harbor protection is the cornerstone of digital regulation dating back to the earliest days of the internet," Vikram Jeet Singh, partner at law firm BTG Advaya, told CNBC, adding that the loss of this immunity might expose social media companies to further civil and regulatory actions.

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