India’s Supreme Court has deferred hearing of a defamation case against the local unit of Google on whether it’s liable for offensive comments posted by a user on Blogspot.com. The case has been in play for three years.

The case, originally filed by a Hyderabad-based construction company Visaka Industries, underscores growing concerns around Internet freedom in India and several grey areas in interpreting the Internet laws that could have an adverse impact on everybody from Google to Facebook and Twitter. A Google India official confirmed that the case will now be taken up after four weeks.

However, the laws in India are still unclear.

In 2009, India changed laws to hold Internet companies liable for any “offensive” content on their site. Basically, this means that the Internet companies such as Google, Facebook and Twitter can be held liable for any “offensive” comments posted by a user. Later, in December 2011, the Indian government asked Google and others to pre-screen user content and remove anything defamatory. The government also asked Google and other social media sites to delete any content deemed objectionable.

Since then, several users have been booked for Internet offenses. In 2012 for instance, police arrested two women in Mumbai for making “offensive remarks” against a politician on their Facebook pages.

The precedent isn’t looking good for Google. In 2011, Google lost a case against Visaka in the High Court of Andhra Pradesh and appealed to the higher court saying it has no control on what users post.

Meanwhile, cases like these are making it even tougher for users and the Internet firms to interpret what’s wrong and right. The consequences of any criminal proceedings can be really damaging for Google if held liable. As the WSJ noted, Google managers in India could face fines starting from around $1,600 and even life imprisonment if convicted.

In November last year, Google chairman Eric Schmidt even made an appeal to the Indian government to give up on Internet censorship. Schmidt had written a piece for the book “Reimagining India” by McKinsey.

India has been tightening its grip on social media using the 2008 Information Technology (Amendment) Act that allows increased censorship.

India also ranks quite low on Internet Freedom, according to this report by the Freedom House. The Freedom House adds that the Central Monitoring System, partly in place since April 2013, seeks to equip a range of agencies to monitor any electronic communication in real time, without informing the target or a judge. A bigger challenge facing users and Internet companies in India is that they can be held liable and even arrested for making any “offensive” comments on the web and social media.

This is how Freedom House describes the current state of Internet freedom in India.

A 2008 Information Technology Act amendment allowed officials to issue blocking orders to internet service providers (ISPs), outlining a procedure and protecting compliant companies from legal proceedings. But 2011 intermediary guidelines under the same Act introduced a different process, making companies liable to criminal penalties if they fail to delete or take down content which any individual flags as “offensive.”

Like many governments around the world, India too has been justifying these actions citing security threats. But the problem is lack of clarity on the IT Act’s punitive section 66. “During the coverage period of this report, police arrested at least 11 people for social media posts—including tags, ‘likes’ and closed group comments—under the section’s vague ban on annoying, offensive, or menacing messaging,” the Freedom House said in its 2013 report.

If Google loses this case, it will be held accountable for criminal activities on its network. This will force Google and others including Facebook, Twitter to ensure monitoring of posts and comments all the time. This kind of tracking will be “humanly impossible”, according to a top executive at a large Internet company based in India.

To be sure, it could take few months after the Supreme Court starts hearing Google’s plea for any judgement to be passed. But officials at Facebook, Twitter and Google are anxiously watching the developments as a test case for how to do business in fast-growing, developing markets like India.